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SERENA CT WAP PLE A NIN LS Ba WE CORED EIEN LTE 


THE DEVELOPMENT OF RAILROADS IN THE UNITED STATES 
‘DURING THE QUARTER OF A CENTURY SUCCEED- 
ING THE CIVIL WAR 


TEH HSI CHEO 


A. B., UNIVERSITY OF NANKING, 1915 


THESIS 


SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS 


FOR THE DEGREE OF 


MASTER OF ARTS 


IN RAILWAY ADMINISTRATION 


THE GRADUATE SCHOOL 


OF THE 


UNIVERSITY OF ILLINOIS 


1921 


‘ a) Sie a, « ' 
4“ : se a a mah," 1.9 ahd’ ae, ila 


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5 


UNIVERSITY OF ILLINOIS 


THE GRADUATE SCHOOL 


I HEREBY RECOMMEND THAT THE THESIS PREPARED UNDER MY 


SUPERVISION BY TEH HSI CHEO 


ENTITLED_THE DEVELOPMENT OF RAILROADS IN THE UNITED STATES 


DURING THE QUARTER OF A CENTURY SUCCEEDING THE CIVIL WAR 


BE ACCEPTED AS FULFILLING THIS PART OF THE REQUIREMENTS FOR 


THE DEGREE OF A, asl. 
Maa 


In Charge of Thesis 


Head of Department 


Recommendation concurred in* 


EE EE ee, Se Committee 


on 


Final Examination* 


*Required for doctor’s degree but not for master’s 


Digitized by the Internet Archive 
in 2015 


https://archive.org/details/develoomentofrai00cheo 


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The Development of Railroads in the United State 


c 
wh 


during the quarter of a century succeeding the 


i a War 


\ 
SNe, Ben 


Contents 


Chapter I Introduction. 


(A) Brief Summary of Railroad Construction 


preceding the Civil War. 


Chapter II Railroad Construction, 


(A) The period from 1865-1870. 


(B) The period from 1870-1880. 


(C) The period from 1880-1890, 


Chapter III Consolidation of Railways. 


(A) Causes of Consolidation. 


(B) Examples of Varieties of Consolidation. 


(C) Result. 


Chapter IV Railroad Capital. 


(A) Expansion of Capital and Methods of 


Financing. 


(B) Relation to Costs. 


(C) Return to Capital, 


r= Chapter V Development of Railway System and its relation 


to the general economic growth of the country 


CHAPTER I 


A Brief Summary of Railroad Construction preceding 


the Period 


The railway in the United States came suddenly, in the 
midst of turnpike and canal building. In 1826 the first railway 
was built in this country. It was a granite carrier, connecting 

he quarries in the town of Quincy, Massachusetts, with the Nepon-= 


set River, a distance of about three miles, This’read was: built 


for a patriotic purpose; its main object was to supply granite for 
1 
the erection of Bunker Hill Monument. Three years later, several 


other roads were partially completed, and the introduction of the 
Steam locomotive engine inaugurated. Among the first steam roads 


'Which were built for general public use were the Baltimore and Gn io, 
i?) 


- 


the South Carolina and the Mohawk and Hudson, The total mileage, 
at the end of 1830 was about thirty miles. 

The success of these roads satisfied the public mind that 
the new means of transportation was a necessity to the country and 
they were looked upon as the most efficient instrument to aid in 
the settling and developing of the vacant interior, Their progress 
was consequently rapid. In 1840, ten years later, the total mileage 


reached 2,818. The roads constructed during this period radiated 


from several Atlantic seaports, of which Philadelphia was the most 


ts on and Van Metre, Principles of Railroad Transportation, p20 
Qe pid. ; p22. 


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important, 

In the year 1850 the length of the railways had increased 

to 9,021 miles, of which but a small portion was located in states 
4 

west of the Alleghenies. In New England, where the country 

most densely populated, the progress was greater, so that by 

year 1850 nearly all the present trunk lines in that section ] 

been completed. 

During the succeeding decade the Eeens lines west from 
the Hudson, the Delaware and the Chesapeake were brought into use, 
and the rail had been spread over a large part of the country lying 
eastward of the Mississippi; the total length in this period being 
something more than 30,626 miles. In the midst of this period the 
Mississippi had been reached and crossed, and railroads built in 
Missouri(chiefly by state loans) and Iowa, Tennessee, Kentucky 


(state aid) and the states south to the Gulf had been liberally 


5 
furnished with railroads. The Civil War, from 1861-1865, brought 


construction almost to a ae but even during this period of 
agitation, the national legislature found time to plan and encour- 
age the construction of those great works which now connect with 
the Pacific Coast. Through the agency of these roads commercial 


connections with China and Janan have been successfully developed. 


5. Raper, C. L., Railway Transportation, pp182-83. 
4, Johnson 2nd Van Metre, Principles of Railroad Transportation,p® 


5. Raper, C. L., Railway Transportation, p183. 


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CHAPTER IT 


Railroad Construction 


In order to deal with the development of railroad constru- 
ection in the United States during the quarter of a century succeed- 
ing the Civil War, it is most convenient to divide the railway 
system of the country into six groups. These groups are the Hastern} 
Central, Southern, Northwestern, and Pacific. This division is in 
every respect identical with those divisions adopted by the United 
States Census Office and the Interstate Commerce Commission, save 
‘for the fact that several of the ten groups Lage they enumerate are 
here combined in order to reduce their numbers. These groups wil 
be successively dealt with in the Polewing pages. 

(A) The Period from 1865-1870 
(1) New Construction in the Eastern Group 

In 1865, there was completed a branch line of the Pennsyl- 

vania Railroad from Blairsville to Freeport, on the Allegheny River. 


At Freeport, it connected with that of the Allegheny Valley Railroad 


running thence to Kittanning and then to the oil region. This 


branch was used by the Pennsylvania Railroad Company as an avenue 
for the coal, iron and petroleum trade* between the Allegheny and 
hiladelphia. Previously all these stapes had to go to Pittsburgh 
to find shipping hither but now the commerce floating down the 


2 
Allegheny River might find a place for shipment east at Freeport. 


i, Van Ode, American Railroads as Investments, p183. 


2. American Kailroad Journal, 1865, p845. 


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Chicago and Great Eastern Railway, from Chicago to Richmond, Indiand, 
a distance of 223 miles, was opened. This road made possible a 
through traffic to the Atlantic cities. Connection was made at 
Richmond, via the Little Miami and Central Ohio Railroad to Balti- 
more or over the Stuenbenville road, via Pittsburgh to Philadelphia 
and New York. It opened a fourth trunk line from Chicago to the 
East, and was the most important connection for the western roads 
which centered at Chicago. Lt dia not, at first, become Sener 
line of the Pennsylvania Railroad. In 1868, it was taken over by 
the Columbus and Indiana Central Railway Company. ‘the consolidated 
line embraced 788 miles of track which were distributed as follows: 
Chicago and Great Eastern, 223 miles; Indiana Central, 188 miles; 
Peoria, Logansport and Burlington, 183 miles; Union and Logansport, 
93 ae At. the close of the seventh decade, the Pennsylvania 
Railroad nad secured the control of the Columbus and Indiana Central 
Railway; thus the Chicago and Great Eastern Railway was ae 
In 1867, the road operated by the Baltimore and Ohio Rail- 
road Company comprised three distinct parts: the main stem, the 


Washington Branch and the Northwestern Virginia Railroad, which at 


this time was under lease to the Baltimore and Ohio Kailroad Company 
6 


HN The length of these several lines were as follows: 


53. American Railroad Journal, 1865, p227. 
A tbid. 1868, p145. 


ot Ringwalt, J. L., Development of Transportation Systems in the 


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United States, pi85, 
6. American Railroad Journal, 1867, 1338. 


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Washington Branch 
Northwestern Virginia Railroad : 
Total length 513.1 miles 
An extension of the Erie Railroad was completed in 1868. 
The extension was from Buffalo to Niagara Falls. The route of 
road was considerably shorter than the present line of the New York 
Central Railroad to the Falls. It was a very important extension, 
not only for the Erie Company but for the Great Western Railway of 
Canada and for the city of Buffalo. It gave the Brie another route 
to Chicago, independent of its connection with the Lake Shore Line; 
it gave the Great Western another route to New York and the East, 

- independent of its connection with the New York Central, and it gave 
the city of Buffalo the advantage of another route to the Falls and 
brought a great increase of rail traffic which had hitherto gone by 
the way of Suspension Bridge and by Dunkirk. 

(2) New Construction in the Central Group 

In 1865, the so called “Lake Shore Line" was made up of 
the state line railroad, 68.34 miles in length; the Erie and North 
Hast, 18.50 miles; and the Cleveland, Painesville and Ashtabula, 


95.49 miles, These roads extended from Buffalo, New York, to Cleve- 


| land, Ohio. To this might be added the Cleveland and Toledo, 


Miles and the Michigan Southern and Northern Indiana Railroad, 246 


| miles. These made up a total length of "Line" from Buffalo to 


7. American Railroad Journal, 1868, 13538. 


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(3) New Construction in the Southern Group 

The Chesapeake and Ohio Railroad, as it is now known, was 
a consolidation of the. Virginia Central and the Covington and Ohio 
Railroads. This road was at that time completed and in operation 
from Richmond to the celebrated White Sulphur Springs of West 
Virginia, 227 miles, and there remained but 200 miles to be complet 
to carry it to the proposed terminus on the Ohio River at or near 
the mouth of the Big Sandy River, 150 miles above Cincinati, and 350 

9 


aa 
miles below Pittsburgh, This road, when completed, would be one of 


the great trunk lines between the seaboard and the Mississippi Vallel,. 
Its principal traffic was the transportation of the iron ores which 
were found in vast quantities and surerior quality near the center 
of its route, and the famous cannel and splint varieties of coal 
which were found in the Kanawha Valley. Besides the coal trative, 
its advantages of low grades, cheap fuel and equable climate would 
enable it to carry the Leto is breadstuffs and PrOVisions of the 
Ohio Valley to their destination on the sea-board. It made very 
direct and easy connections with the 16,000 miles of inland navi- 
gation, and also with the 20,000 miles of western railroads. 
(4) New Construction in the Northwestern Group 

The extension of the Chicago and Northwestern Railway Con- 
pany from Green Bay to Shawano was energetically carried forward, 
The Peninsula Railroad from that point to Marquette, on Lake Super- 


ior, was completed and regular trains were arranged. 


8. American Railroad Journal, 1865, p10890. 


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Its extension in the state of lowa was now completed with- 
in twenty five miles of the Missouri River at Omaha where it con- 
nected with the main stem of the Great Union Pacific road, which 


4 


already carried freight and passengers three hundred miles beyond 
10 
the Omaha frontier. In 1867 the Iowa division of the Chicago and 


Northwestern Railroad was finished as far as Council Bluffs, thus 


completing the link between the seaboard and the North Platte, three 
1 


hundred miles west of the Missouri River. 

In 1869, the lines of road owned and leased by this conm- 
pany were as follows; Chicago to Clinton, Towa, 183.1 miles; Clinton 
tO the Missouri River, opposite Omaha, 352.9 miles -total 491 miles. 
Sunction to Freeport, 91 miles; Elgin.to Richmond, 53 miles; Bel- 
Videre to Madison, 67.6 miles; Kenosha to Rockford, 72.4 
Chicago to Milwaukee, 85 miles; Chicago to Fort Howard, 

Escanaba to Lake Angeline lines, 59 miles--total length of 


1156 miles. Total length of main lines owned by the Company, 803.1 
12 


moles. The length of different divisions was as 
Wisconsin Division, 
Galena 
Iowa 
Madison 
Peninsula 


Milwaukee 


Total as above bi56.0 


10. American Railroad Journal, 1865, 


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In 1867, by the completion of the road from Cresco to 
Owatonna, about eighty-five miles known as the Iowa and Minnesota 
Divisions of the Milwaukee and St. Paul Railway, continuous rail- 
road communication had been established between St. Paul and Mil- 
Waukee and the entire system radiating from Chicago. he length of 
the entire road from Milwaukee to St. Paul was about 420 miles, of 
Which about 220 miles on the west, and 20C miles on the east side of 
the Mississippi. This pertion of the ae was formerly known as the 
Milwaukee and Prairie du Chien Railroad. i 

The Milwaukee and St. Paul Railway Company now owned 825 
miles of railway in full operation-this mileage was inelude the 
Mileage of the Minnesota Central rl the McGregor Western through 
consolidation. Every mile of this road was a productive property. 
The public had now a connected line of railway from the city of New 
York, via the Milwaukee and St. Paul Railway to Minneapolis, St. 
Paul and St. Cloud, a distance of more than 1500 miles, about one 
third of which was over the Milwaukee and St. Paul Railway. The 
Winona and St. Peter, the St. Paul and Pacific, the Minnesota Valley 
the Minnesota Southern, the La Crosse, Tremplean and Prescott and 
the Tomah and Lake Superior Railroad Companies, which were tribu- 


taries or connecting roads, were all near completion. This new line 


of road passed through the most fertile and densely populated counh- 


ties of Northern Iowa and Minnesota. It had undisputed possession 


of the trade of an immense region, unsurpassed for the richness of 


153. American Railroad Journal, 1867, 1934. 


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immense granaries a golden cia ie wheat and other products would 
(A 
be sent forth over this railroad. 
In 1868, the lines of this Company would be known and 

designated as follows: 

1. From Milwaukee to Prairie du Chien and from 
Milton to Monroe, as the Prairie du Chien 

2. From Milwaukee to La Crosse via Watertown, 
and from Watertown to Sun Prairie, as the La Crosse Division. 

3. From North Milwaukee to Portage, and 
Haricon to Berlin and Omro, as the Northern Division. 

4, From McGregor to Minneapolis,.as the Iowa 


iT 


and Minnesota Division, 


The following table shows the length of each 
15 
divisions mentioned above, 


La Crosse Division 
Prairie du Chien Division 
Northern Division 


Iowa and Winnesota Division 


Total length 825 Miles. 
(5) New Construction in the Pacific Group 


The great enterprise of the railroad hi 


United States durine the seventh decade was the pbuilding o 
: © a) 


14. American Railroad Journal, 1865, p.160. 
15. Ibid., 1868, p.169, 


EO ae 


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transcontinental line, known as the Union Pacific. This road was 
built to unite the Atlantic and the Pacific by its iron bonds. The 
main line built by the Union Pacific Railroad Company was from 
“Omaha to Ogden. This company was chartered in 1862 and rechartered 
in 1864. in order to build this road, the Government gave the oes 
pany the assistance. The company received from the Government a 
Tand grant of 12,600 acres for every mile of road comvleted, and, in 
addition to this, received a large loan fund, amounting to 416,000, 
$52,000 and $48,000 ner mile, the amounts varying with the changing 


16 


Q 
Ve 


fe 


cost of construction in the mountains, desert.and prair 
In 1865, the work on the eastern division commencing at 
Omaha, Nebraska, and striking due west for the passes of the Rocky 
ae was so far advanced that 100 miles of the road were con- 
pleted. i In 1866, it had been completed from Kansas City, up the 
valley of the Kansas River to the vicinity of Manhattan, for a 
distance of 100 miles on the main line, while the track from Man- 
hattan to Fort Reiley, a distance of 40 miles, had been nearly 
“aa Two hundred miles of track from Kansas City were opened 
in loys By the end of the same year, the Union Pacific Railroad 
extended a distance of 525 miles west from Omaha to the eastern base 
of the Rocky Mountains, In 1868, the mileage west of Omaha had 
increased to 698 miles. Not long afterwards, the Union Pacific had 


reacned to the Medicine Row River, in Wyoming Territory, and the 


construction was pushed forward so energetically that the line was 


16. Van Oss, American Railroads as Investments, p.627. 


17. American Railroad Journal, 1865, p.531. 
ia, id ., 1867, p.245). 


of ; tS ra Bd i 

eel C> BA miow @llek 
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Opened on May 10, 1869. At the time of its completion the Union 
Pacific had a length of 1,042 miles, and ran from Omaha to Ogden, 
19 

where it connected with the Central Pacific for San Francisco. 
(B) The Period from 1870-1880 
(1) New Construction in the Eastern Group 

In 1874 the first division of the Chicago extension of the 
Baltimore and Ohio Railroad Company was opened. ‘This line embraced 
the road from Centreton, on the Lake Erie division to Deshler, on 
the Cincinnati, Hamilton and Dayton Railroad, a distance of sixty- 
three miles, By means of this extension the incre2sed grain busines 
centered in Toledo together with the traffic drained by the Cincin- 
nati, Hamilton and Dayton Railroad, were made tributary to’ Baltimore. 
This line passed through the flourishing towns of Republic, Tiffin 
and Fostoria. At Tiffin it intersected with the Cincinnati, Sandu- 


sky and Cleveland Kailway, and at Fostoria with the Lake Erie and 


Louisville Railway, both ot which were expected to prove valuable 
20 


Grain feeders. The remaining 206 miles of the line to Chicago, wera) 
to be finished at an early date. When the whole line to Chicago was 
complete, it gave the Baltimore and Ohio a continuous road between 
that city and Chicago, a distance of 811 miles. 

(2) New Construction in the Southern Group 


‘The great line of railroad upon which the Chesaneake and 


Ohio Railroad was based was already completed and opened for traffic 


from Richmond to the White sulphur Springs, a vdistance of 227 miles; 


nS. Van Oss, American Railroads as Investments, p.629 


20. American Railroad Journal, 1874, p.35 


j «2an? 
: cro .f Bc larte. 


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—— a = - _- be on ete - 


The portion between the Ohio River and the coal deposits of the 
Kanawha Valley, 100 miles distant, was nearly ready for business. 
The intermediate section of about 100 miles was also vigorously 
advanced and would be completed within a very short time. When the 
whole line was brought into completion, it would form a continuous 
trunk line from the navigable waters of the Atlantic to the Ohio 


21 
River. 


Happily, this road from the capacious, ever-onen, Chesa- 


peake ‘navigation to the center of the Ohio Valley, was completed in 
1875. It formed the Grand Central Trunk Line of the railroad system 
of this country. It possessed peculiar advantages for through traf- 
¢ of western products for consumption and shipment to the Eastern 
seaboard states. It had a special advantage as a direct, attractive 
and speedy passenger line between a large number of the western and 


southwestern cities and Washington, Baltimore, Philadelphia and New 


It was also advantageously situated to become a cheap and 
favored route for both immigrants and merchandise between Burope and 
the west. Vessels of the largest class would be able to land along- 
Side the wharves at its deep-water terminus and transfer their pass- 
engers and cargoes directly from shinboard to the cars, thus avoiding 
the annoyance, expense, and delay incident to otner routes. 

At Richmond connection was made with the railroads leading 
north and northeast via the Richmond ana Frederiscksburg Railroad to 
Alexandria and Washington and also with the railroad lines leading 


e'. American R Ge xc aware. 7.1207. 


i] 


| 


1 Re ee 


oo ec Sia E g 


rae trpoesd 
kins Vea 


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te4 T 
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ee 
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Soe ootectdesW Boe 


south of Petersburg, Norfolk, Wilmington, Charlatte, Augusta, 
Charleston, Savannah and Macon. 

At Gordonsville, by means of this Orange and Alexandria 
Railroad, regular connections were made for Washington, Baltimore, 
Philadelphia, and New York by continuous all-rail routes. 

Connections at the western terminus, Huntington, were made 
With regular packet ined or steamers to Ironton, Portsmouth and 
Cincinnati, and through them with the United states mail line of 


« 
Steamers to Louisville, or the short line of road leadin 


5 southwest 
Or northwest. The trip to Cincinnati, 175 miles, was made downward 
in fifteen hours, and upward in twenty-four to thirty hours. Boats 
Stopping at Huntington on their way to and from New Orleans, Dib. 


Ba) 


Louis, Cairo or intermediate points, could easily transfer freight 
22 
bound in either direction. 
In 1871, the Illinois Central Railroad brought under its 
control the section of the Iowa Falls and Sioux City Railroad be- 
zt 
tween Fort Dodge and Sioux City. . This competed the company's leased 


line from Dubuque to Sioux City, a line 326 miles long and which in 


03 


connection with the Galena Division of the Northwestern formed a 
very direct route between Chicago and Sioux City, 514 miles. 
A link of 85 miles between Cairo, TiEEino is , and Jackson, 
Tennessce, was built by the Illinois Central and the Southern Rail- 
|road Association. This jink was to establish close connection with 


|} the entire Southern Railroad System, avoiding a water transfer of 


;22. American Railroad Journal, LS#55.. Ds 159 


23. The Railroad Gazette, 1871, p.60. 


» 


14 
24 
twenty miles between Cairo and Columbus, Kentucky... Moreover, this 
road rendered Chicago an uninterrupted railway service to Mobile 
and New Orleans by the Illimois Central Railroad over wnich passen 
ger trains could run without any change of cars whatever. 

In 1878, the Kankakee and Southwestern branch of the 
Tilinois Central Railroad, thirty+seven miles in length, was fini- 
shed. It traversed the terrirory from Kankakee to Chatsworth, 
filinois, and in the same year, the company took possession of the 
Dakota Southern Railway, sixty-two miles in length, It extended 
from Sioux City, lowa, to Yankton in the Dakota Territory. It 
passed through a fertile, wheat=growing country, and Southern 

a5 
Dakota and Northern Nebraska were its tributaries. 

When the extension of the Illinois Central.Railroad 
reached New Orleans in 1880, it had increased its traffic in carry 
ing fruits and vegetables from the Southern States and the souther1 
partion of the state of Mississippi to Chicago ea the. North... lts 


dine from the city of New Orleans to the southern extremity of 


far south as the north line of Tennessee, while its main line from 
Chicago to Cairo was no less than 458 miles long. From the latter 
point the Chicago, St, Louis and New Orleans road, owned by the 
Illinois Central, ran straight on to the Gulf at New Orleans, 550 
Miles, so that the entire line from Chicago to New Orleans was 900 


miles long. So when the winter still reigned at the northern ter- 


4. American Railroad JOuUeHALe TET S, pe 115, 


m5. Ibid., 1876, p.l249. 


+ - —_ — - ‘ 
= ; of aig 7 : lin ee a a Se ke SS 


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Ei ere aes 


minus, gardens and orchards were in bloom at the opposite end of 
route and as the season advanced the line of ripvened vegetation 
moved northward until the autumn harvests were ripe on the shore 
26 

Lake Michigan. 
(3) New Construction in the Northwestern Group 

In 1867, the Chicago and Northwestern Railway } 
by purchase the ownership of the La Crosse, Trempnealean 
and the Winona and St. Peter Railroads. The La Crosse, Tremnealean 
and Prescott Railroad consisted of a link of twe nty-eight miles of 
road completed in 1870. This line extended from a point ovposite 
the city of Winona, down the eastern side of the Mississippi River 
tO a point about three miles east of the city of La Crosse, 
Winona, a bridge was built to connect the Winona and St 
way. At its southern terminus it now connected with the 
and St. Paul Railroad, mae its witimate connection was to be made 
With the new Madison Extension Line, which was being constructed 
from Madison to a junction with this road, 

Another branch of the Chicago and Northwes 
known as the Menominee Extension, a distance of 120 Miles, w: 
Pleted in 1872. It gave the Chicago and Northwestern Railroad 
direct all-rail line between Chicago and Lake Superior. Chicago 
Was thus brought into direct rail communication with the very heart 
of the great lumber region of Wisconsin. The extension, together 


With new new lines completed during the year, added 400 miles to the 


26. Railway Age, 1880, p.592 


eet Se ~—_ 


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¢ Wi | ri t ag ger. c 
; Frag us f 3 any t ~ 


A oe ®| a + q . 
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: » See. g "9887 


an 


Northwestern, giving it a total of about 2,000 miles of road, 
In 1878, the Chicago and Northwestern Railway Company 
3 6 ¢ vi 
operated the New Maple River Railway in Western lowa, fifty-nine 


miles, and the Menominee River Railway twenty-six miles in the 


lal 


upper Peninsula of Michigan, just west of Green Bay. This made th 


28 


—_ 


total worked by the company 2,978 miles. 
The Chicago, Milwaukee and St. Paul Railroad, as is now 
known, Was a consolidation of the 5t. Paul and Chicago and the St. 


90 
7 
Paul and Milwaukee. In 1874, it possessed 1,413 miles of com- 


Pleted road, situated in the following states, viz: in Wisconsin, 
677 miles; in Minnesota, 351 miles; in Iowa, 337 miles; and in 
Illinois, 47 miles. 

The Milwaukee and Portage Railroad was brought under con- 
trol by the Chicago, Milwaukee and St. Paul Railroad in 1878 
through the purchase of lands owned by that corporation. A majo-=- 
rity of the stocks and bonds of the Dubuque and Southwestern Rail- 
road was also purchased, This latter purchase afforded the Chicago 
Milwaukee and St. Paul Railroad a direct line from Milwaukee to 
| Cedar Rapids, Iowa via the Western Union, the Sabula, Ackley and 
Dakota, and the Dubuque and Southwestern Railroads. All of these 
roads were important in increasing the traffic of the Chicago, 
Milwaukee and St. Paul Railway Ratan. 


The Chicago, Milwaukee and St. Paul Railway had gained 


| 27. American Railroad Journal, 1872, p.1604. 


Sane bid. VS7S), *p.2e2.. 
29. Van Oss, American Railroads as Investments, p.463 


| 30. American Railroad Journal, 1878, p.546, 


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of? sitlees sonal. af Jastaoge 


Lonsoint ed2 Ro o2tterntd 
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s03t.0 \ST8E pLaexuat aos 
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,de2.q BY) Lamtige 


acquisition of the Chicago, Clinton, Dubuque and Minnesota and 
Wisconsin Valley Railroads and were formally transferred under their 
control. in 1880. These roads were operated as the Dubuque pee 
and the Wisconsin Valley Railroad as the Wisconsin Valley ee 
The former ran from Clinton, Iowa, to La Crescent, Minnesota, a dis- 
tance of 420 miles and the latter ran from Toma, Wisconsin, to Jenne 
“Wisconsin, a distance of 108 Oa 
The Wabash, St. Louis and Pacific Railroad was a consolida- 
tion of the Wabash and the St. Louis, Kansas City and Northern Rail- 


road Companies. ‘this company in 1376 controlled about 2,000 miles 


of road which extended from Toledo, Detroit and Chicago in the east 


to St. Louis, Kansas City and Omaha in the west. ‘the lines of the 
3 


consolidated road were as follows: 


1. Wabash Lines Miles 

Toledo to Hast Louis 433 

Chicago and Paducah 157 

Chicago anc Strawn SS) 

Kel River he 

| Decatur to Quincy and Hannibal 201 
| Other branches 08 


Total miles 1043 


31. American Railroad Journal, 1880, p.1,289. 
Se. Loid., 1836, p. t,6cs.. 
133. Ibid., 1876, p.386. 


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P82. «ove! 


16 
2, St. Louis, Kansas City and Northern Lines Miles 
St. Louis and Kansas City | As 
Moberly and Ottumwa 141 
Brunswick to Pattersburg 81 
Pattersburg to Council Bluffs 146 
Lexington Junction to St. Joseph 76 
Quincy, Missouri and Pacific 192 
Other branches 37 
Total miles 848 


Total length of lines. 1896 miles. 

The extension of the Eel River Railroad from Butter to 
Detroit, and the acquisition of the Pekin and Southwestern Rail- 
road, would give the new company a control of more than 2,000 miles 
of dedane 

The Indianapolis, Peru and Chicago Railway was purchased 
in 1881 by the Wabash, St. Louis and Pacific Railroad Company, It 
extended from Indianapolis north to Michigan City, on Lake Michigan 
crossing the main line at Peru, and the Logansport and Detroit line 
at Denver, Indiana. The length of this road was 161 ae Another 
300 miles of road was thus added to the Wabash, St. Louis and 
Pacific Railroad. 


In 1872, the Wisconsin Central Railroad had leased the 


road of the Milwaukee, Lke Shore and Western Railroad Company. This 


B4 uc American Railroad Journal, (876, p.t,263. 


35. Ibid., 1881, p.99 


va 
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St 


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company was 2 consolidation of the Milwaukee, Manitowoc and Green 
Bay, and the Appleton and New London Railroad companies. This 
leased road extended from Appleton to Manitowoc, thence to Milwau- 
kee, and passed through a densely settled country. This lease 
completed the line of the Wisconsin Central Railroad from Lake 
Superior to Manitowoc on Lake Michigan where it connected by boat 
across the lake with railroads which ran directly to Detroit and 
New York. It thus afforded the shortest line from Lake Superior. 
It had also a short line from Manitowoc through Sheboygan to Mil- 
Waukee, where it connected directly with the Chicago and Northwes- 
tern to Chicago. This line from the termination of the Northern 
Pacific to Chicago, was about 100 miles, and shorter than any other 
route. The country through which this road passed comprised some 
of the very best farming lands in the United States. The pine and 
hard-wood timber, and the iron property were not to be surpassed in 
value by any other section in the pe 
(4) New Construction in the Southwestern Group 

The most important construction in this pericd was the 
Atchison, Topeka and Santa Fe Railroad. The charter of this road 
was granted in 1863. The route prescribed was from Atchison, on 
the Missouri River, to the western boundary of Kansas, in the 


direction of Santa Fe, New Mexico, a distance estimated at 500 miles 


The importance of this road was Ene face that it, formed.a Link in 


| the great line between the Atlantic and Pacific, passing through the 


BG. American Railroad Journal, 1872, p.969. 


ias¥ ,oedvewiie esd To Bobiaebilosanaoigs 


af! pag’ icA wobdok wee Bey note lqaa 

, ~wewt th yiy .3oow La of cotelqqA mont Babaetee 
8 : : Le 

i] nce [ r .witavoo beljter tisemeh & Caroma 

ean <[iei Leptaed alenooell adie 


a - 


tae » J. even cenfidati etal ae 


o fooulS cen cots Bbseotl iat aie 
onl soivods e427 PsbictTTe aie 

co Agvet owotlial nott enit trode 3 

bos oOpecio’ eat iw VitoesiO beJ°sniheg tt 


sa. itdantoie? edt sock etil aid? jae 
<> 


iy ; reali fe ows eet fim ODOT vote sev ORs 
tscnos pbesear heot efds tobi sauotad ea 
,estes® Sedtal ed? mt «bus! @mieee 


of Jom. oxew yvateqer] qeil edd Baa Pea 


Dl ; ‘ 
vitauvoo en? nmi goljoga ae 


YraAsraey a veo echt a aie 
w I roc al (f eeftroustanos Ine faognl ve 
traio ent .beotLisa es rata Based 
W ef itssetgy etpvow eff Eom 
A Io ytebiued otelaen 6nd of «S8yae 


¥ 


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~ 4 ' : a 
‘Ferd Sevowlt sotesen ,olttost GaA-olsne lis et? neowieed ae 


22a 8581 


most valuable and productive mining regions of Colorado and New 
Mexico. 

In consideration of the building of this road, Congress 
endowed the company with 2 valuable land amounting to 6,400 acres 
gcox every mile of road constructed, on condition, that the entire 
railway should be completed within the ten years expiring in March, 
ees This clause nearly deprived the company of ifs land grant, 
| for the depression following in the wake of the war rendered cons- 
| truction an impossibility, and six years elapsed before a start was 
| made. In 1869, 28 miles were constructed; in 1870, 34 miles, In 
| 1871, the company had 106 miles in operation from Topeka to Florence, 
} and the work from Florence to Newton on the south, a distance of 50 
Hy 9 
i Miles, was pushed rapidly to er nee The section between 
| Topeka and Atchison, was completed as late as May 13, 1872. A mea- 
i ger ten months remained before the expiration of the period stipu- 

j lated under the Land Grant Act, and the company had built barely Biel 
rourth of its line; yet so energetically did its managers push work 
| forward that the requisite 540 miles were completed within seven 
months, the eastern boundary of Colorado being reached December 207, 
| 40 ° 

1872. 


The line of the Atchison, Topeka, and Santa Fe Railroad was 


pextended to Pueblo, Colorado, in 1874. And at the same time, the 


ptocal line, known as the Pueblo and Salt Lake Railroad, was rapidly 


Van Oss, American Railroads as Investments, p.558 
Bear. » Di. 58. 
American Railroad Journal, 1871, p.713. 


Van Oss, American Railroads as Investments, p.559. 


a, ‘> 96! tetetigg 


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ie 
gepuilt eastward, to connect with the Atchison, Toveka and Santa Fe at 
f Grenada, the present terminus of the latter road. The section was to 


afford a continuous line of railway under one direction, from the 
H 41 
jelissouri River, at Atchison, to the foot of the Rocky Mountains. 


| The extensions of the Atchison, Topeka and Santa Fe Rail- 
\ 

} rox were destined to open up a large section of country, rich in 

| mineral and agricultural resources, The Pueblo and Arkansas River, 
1 | 
about 20 miles west of Ft. Lyon, and ran southwesterly via Trinidad 


Ipand the Raton passed to the south line of Colorado, This extension 


| 


| was a distance of 95.5 miles. 


The New Mexico and Southern Pacific Railro2d started fron 


Me the north line of New Mexico, at the terminus of the Pueblo and Ar- 


a Valley Railroad, Southern Division, and ran on the east side 
| 


|} of the Rocky Mountain range in a southwesterly direction to Las Vegas, 


118 miles, and thence to the Rio Grande River, at or near Albuquerque 


about 129.5 miles. The whole extension in this direction was about 
q 


i 2 A 
i 243 Miles. The resources of this part of the country were very great 


| acy consisted in part of coal, timber,(from the Raton Mountains), 


Ipeive stock, wool, hides, ore, and bullion, and as a further business 


Mfor the road there was a large amount of general traffic, such as 


| a 


es machinery and the like. 
q 


i] to the fact that ores had in many cases to be hauled hundreds of mile 
1 42 
a Ox teams before they reached the railroad terminal. Thus it was 


Wai. American Railroad Journal, 1874, p.1,083.. 
| 2. Tois., 1878, p.874-75 


Ss The mining business at this time was quite limited, owing 


- 
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4 


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ra pit foatnot: ens if. = 
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. 


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; iu? bor (Se ost Senoget eee ee 


“difficult for the road to increase its traffic. However, the advent 
6r the road made attempts to decrease the distance of hauling by ox 
| and to induce interested parties to onen new mines. 
H (5) New Construction in the Pacific Group 
The Northern Pacific Railroad was chartered by the Act of 
Beonercss of July 2, 1864, It received a land grant of 12,600 acres 
| for every mile constructed in states and twice that area for every 
Pmile completed in territories. Construction begun in 1869, and the 
section from Duluth, the extreme westerly end of Lake Superior, to 
on the Missouri River, to Tacoma, on Puget Sound, a dis- 
43 
| tance of 105.5 miles, was completed in 1873. At Tacoma, communica- 
Pion was extended a distance of 400 miles to the Columbia River by 
| means of the Oregon Steam Navigation Company. This afforded direct 


Ipmeans of communication and transvortation between the territories of 


|] Idaho and Washington and the state of Oregon and the navigable waters 


)of the Pacific. Tacoma was the terminus of the Northern Pacific Rail 


If road, It was finely situated at Commencement Bay, an excellent harbof 
ij in Puget Sound. 


In 1874 the company was unable to withstand the strain of 


the financial crisis and defaulted on the interest of its bonds, as a 
result of which its affairs were temporarily entrusted to the manage- 


a. of a receiver, until the property was sold in foreclosure in 


~ 


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LN 


very important. It was not only of great commercial consequence as 
the means of bringing into immediate connection with the eastern 
Markets, an immense and very valuable agricultural region, hitherto 
unimproved; but it was of vast importance as a powerful lever to 
aid the government in controlling many thousands of Indians. 
In 1880 the Northern Pacitic Railroad Company operated /16 
Miles of main track, divided as follows: Duluth to Brainerd, 115 
Miles; Brainerd to Fargo, 138 miles; Fargo to Bismarck, 194 miles; 
Bismarck to Glendive River, 103 miles; Brainers to St. Paul, 136 
ao 
(C) The Period from 1880-1890 

The new construction from 1880-13890 consisted chiefly of 
short lines. These were used to expand old systems or to create 
mew ones. More than sixty per cent of the new construction of the 
ninth decade was instates lying west of the Mississippi River. Four 
important new transcontinental lines leading from the Missouri or 
States west of the lower Mississippi to the Pacific Coast were 
completed, 
(1) New Construction in the Central Group 

In, 1882, the New York, Chicago and St, Louis Railroad was 
completed. It closely paralleled the main line of the Lake Shore 


along its entire system,,more than five hundred miles, from Buffa- 


lo to Chicago. Soon after the road was finished a controlling 


interest in the stock of the company was purchased by the Lake 


45 
Shore, 


44. American Railroad Journal, 1880, p.843. 


45. Ringwalt, Development of Transportation System in the U. 5.,P34¢ 


a eae 


ay aN 


et 


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(2) New Construction in the Southern Group 


| 
' 
| 


i. 
‘| 
ea number of extensions or branches in Kentucky, Alabama and Tennessee 


The Louisville and Nashville, during the ninth decade, built 


Pin 1887 it had under construction an extension of the Bardstown 

ff! branch, 22 miles, the Indiana, Alabama and Texas branch, 57 miles, 
Weand an extension from Corbin to Pineville, Kentucky, 50 miles. When 
1 


) completed, several hundred miles of new road were added to its system 
HW (3) New Construction in the Northwestern Group 
The Chicago and Northwestern's new Dakota line was completed 


: 
P 
I 
Bin 1885. The extension was from Hawarden, lowa, northwest to Iroquoik 


Boakota, a distance of 126 miles. It completed a line extending from 


_" northern Iowa Division at Hagle Grove, Iowa, west to Harwarden 

land thence northwest to the Dakota Central line at Iro uois, a dis- 
1 ; , 

Ievance of 288 miles in all, It did not only open a new country, but 
\° . 

|] also afforded the Dakota Central lines a new outlet east by way of 

| ‘ 46 

ij the Northern Iowa Division. 


operated 2,515 miles. In 1888, it operated 4,101 miles of-its roads 


jand controlled 1,339 miles of the Chicago, St. Paul, Minneapolis and 


ee 


| 
| 
4 
. At the end of 1880, the Chicago and Northwestern owned and 


— 725 Miles of the Fremont, Elkhorn and Missouri Valley, 77 
| nites eee Wyoming Central, and 107 miles of Sioux City. and Pacific, 


Meee total owned and controlled being 6,347 miles. 


In 1681, a branch ine of the Wabash, St... Louis and. Pacific, 


= 


| iehown as” tHe ‘Chicago and Strawn road, was completed, The whole 


a eneth of this road was 92 miles. Its chief value was to give the 


ott | cofeth .youtaod «al pedonai 16 2g0m 


ariloes i vakd xvolte-%6 Gell Wee 


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hw 


Wabash through lines from Chicago as follows: To Burlington, Iowa, 
261 miles; to Kansas ae 515 miles; to Keokuk, 270 miles; and to 
St. Louis, 286 miles. 
in 1882, Council Bluffs' extension of the Chicago, Mil- 

Waukee and St. Paul was finished. Regular trains had now begun’ to 
run to Coon ee ee tt) miles from the beginning of the ex- 
tension at Marion, In the Same year, the twelve-mile extension of 
the Hastings and Dakota Division from Frederick, Dakota, to Ellen- 
dale, and the Stillwater branch from Hastings, Minnesota, eighteen 


Miles north to Lakeland, were completed, 


fhe last rail on the new branch of the Chicago, Milwaukee 


Meeend St. Paul, from Cedar Rapids, Iowa, south by west through Sigour 


“ney to Ottumwa, was laid in 1884, The new branch was ninty miles 
“long, and carried the company into a section of Iowa south of any 
7 Weretofore reached by its lines, giving it access not only to 

epeveral jarge and important towns, but also to a country rich in 


meoal., 


The length of the lines owned and overated in 1880, by the 


Chicago, Milwaukee and St. Paul was 2,251 miles in Illinois, Wis- 
Senein, Lowa and Minnesota. The total number of miles at the end 
of 1887, was 5,669. A large percentage of this increase of 5,418 


(miles consisted of new lines, located chiefly in the group of 


Northwestern states, but one important branch extended through 


Railroad Age Gazette, 18 
PD 1LO.n » 


Tie um 5 force oir et SreAacd eee 


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| 
49 
SMissouri, while others were in Wisconsin. The mileage of this 


System was especially large in Wisconsin, lowa, Minnesota, and 
Dakota, 
In 1880, the length of lines operated by the Chicago, Bur- 


my 


dington and Quincy was 1,856 miles. he system was greatly expanded 


Weouring the ninth decade. In 1881, it acquired the Burlington and 


real 


| Wissouri River Railroad in Nebraska and the Kansas Citi bt. Josenh 
i a z 


ieand Council Bluffs; in 1883 the Kansas City and St. Joseph was 
Meabsorbed; in 1885 a traffic agreement was made with the Burlington 
and Northern, which company came under complete control in 1896, 


_* purchase of a majority of stock. At the end of 1889, its 
system included 2,063 miles in Tllinois, Iowa and Missouri and 2,736 


=e 


| Morth, St. Louis on the south, Cheyenne, Denver, and more western 
, | 50 

} Points in Colorado on the west. 

i 

| 


| (4) New Construction in the Southwestern Group 


The Atchison, Topeka and Santa Fe's Manhattan, Alma and 


’ 


Batchison and 26 miles from Topeka, then northwestward 56.5 miles to 
6 Kansas Pacific at Manhattan. 


One year later, this company's New Mexico and Arizona line, 


- Van Oss, American Railroads as Investments, p495-97. 


bl. Railroad Age Gazette, 1884, p.49 


ho 
et 


which ran from Benson, Arizona, on the Southern Pacific, 173 miles 
52 
I= 
west of Deming, to Guaymas on the Gulf of California was completed. 
The Kansas City and Emporia branch, which started from Emporia, 


Kansas, on the main line eastward to Ottawa, southward a distance 
of 535 miles was completed in 1884. This branch, in connection 
With the Southern Kansas main line, completed an additional line 
from Kansas City to Emporia, 114 miles long or some 135 miles short- 
er than the present main line. 
A branch from Jamez to Bernalillo was completed in 1885. 
It was considered one of the most important new lines because of 
the excellent LerreLvory Lt traversed. Besides opening up a large 
Marea of grazing Land, it opened up a mining region. This branch 
also skirted the wooded country lying upon the edge of the Rio 


Grande Valley and rendered accessible the valuable supvly of lune- 


ber from that region, 


- I 


fm te7o, it operated 1,167 miles.of main line and byan=- 
ches. In 1889 it owned 7,574 miles of railway, distributed 238 
follows: Atchison system, 2,090.85; Southern Kansas systen, 935.50 

_ Sonora system, 350.19; sundry lines owned entirely or controlled, 
ineluding the Chicago, Santa RerandsCabifornia; .498).25; 2Chicage, 


Kansas and Western, 903,16; Gulf Colorado and Santa Fe, California 


Southern, California Central, and othersroads;, 2,974.83; Atlantic 


and Pacific, controlled jointly with the St. Louis and San Fran- 


52. Railroad Age Gazette, 1882, p.414. 


53. Ibid., 1884, p.385. 


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sar _ 


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8) 


cisco, 918.86. A large portion of the increased mileage was cons- 
tructed after 1880, It represented numerous extensions in Kansas, 
leading on the west into Colorado and New Mexico, and thence through 
Arizona, by the Atlantic and Pacific, into Southern California, with 
@ branch leading into northwestern Mexico, and a close connection 

at El Paso with the Mexican Central, while from eastern Kansas a 
line(the Gulf, Colorado, and Santa Fe') was constructed through the 
Indian Territory and Texas to Galveston, ee 

In 1882, the new Omaha Extension of the Missouri Pacific 

Was completed. This extension started from Atchison, Kansas, and 
ran by Hiawatha, Falls City, Nebraska, Dunbar, Sheridan, Weeping 
Water and Louisville to House Junction, 145 miles. From House Jun- 
Ction to Omaha, 17 miles, the Union Pacific track was used, making 
the distance from Atchison to Omaha 162 miles. By this route it was | 
200 miles from Kansas City to Omaha, and 492 miles from St. Louis 

to a 

By the lease of the Wabash, St. Louis and Pacific Road, 

the Missouri Pacific added the 3,518 miles of road worked by that 
company to the 5,896 miles which it already controlled, making a 
total of 9,414 miles of road under one management. The extent of 
this system may be shown by the fact that it extended from Toledo on 
the east to Omaha on the west, and from Toledo and Chicago on the 
northto Galveston and to Laredo on the Rio Grande in the south, and 


54. Ringwalt, Development of Transportation System in the United 
States, p.354. 


55. Railroad Age Gazette, 1882, p.309. 


phase? off ede co obetal of baa a6/ 


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56 


to El Paso on the southwest, 


Besides the length of lines of the Wabash, 5t. Louis and 


Pacific, the Missouri Pacific in 1888 operated 7,043 miles of road 


classified under the following heads: Missouri Pacific, 2,357 miles 
St. Louis, Iron Mountain and Southern, 1,144; Fort Scott, Wichita 


and Western, 306; Missouri, Kansas and Texas, 1,611; Central Branch 


Union Pacific, 307; other lines, 403 miles. Aside from the main 


lines of the system, the increase of mileage was largely through 


construction after 1879. 


(5) New Construction in the Pacific Group 


In 1881, the Denver and Rio Grande system was extended 450 


miles to Durango. This extension traversed a rich valley, popu- 


larly known as Animas Valley, where immense coal deposits were 


found. The valley was also the natural southern outlet for the 


rich mining district of San Juan County on the east and north, a 


region covering an area equal in extent to the state of Massachu- 


setts, and intersected by various mountain regions and many rivers. 


In 1882, the Pueblo and San Juan Division was completed to 


Silverton, Colorado, in the center of the San Juan mining region, 


Silver- 


from which a large business had already reached the road. 


ton was 45 miles northward from the old terminus at Durango, 375 


miles from South Pueblo, and 495 miles from Denver. 


In 1883, the Denver and Rio Grande completed a line 734 


miles in length from Denver to Salt Lake. Of this section from 


56. Railroad Age Gazette, 1882, 0.309. 


57. Kingwalt, Development of ‘transportation System in the United 
States, p.3557 


58. American Railroad Journal, 1883, p.51. 


aia 6 ny - 
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30 


Salt Lake to the Colorado line, 272 miles was owned by the Denver 
and Rio Grande Western Company, a separate organization, but which 
was entirely controlled by the Denver and Rio Grande. 

In 1880, the length of lines operated by the Denver and 
Rio Grande was 500 miles. By 1888, it had 1,687 miles. The West- 
ern terminus of the Denver and Rio Grande extension was at Ogden, 
Utah, where a connection with the Central Pacific was made, anda 
new through route from the Missouri River to Ogden was formed dur- 
ing the ninth decade by this combination and a close connection on 
the east with the Chicago, Burlington and Quincy systen. 

The entire length of the Northern Pacific Railroad between 


Lake Superior and Puget Sound was completed in 1883. This main 


: 9 
line was 1,911 miles long. In the same year, the Palouse Branch 


of the system was finished and opened for business as far as Colfax 
Washington Territory, 89 miles eastward from the main line at 
Palouse Junction, This branch passed through a section of eastern © 
Washington, which was growing rapidly in population. In 1886, the 
Cascade Division, extending from Pasco Junction to Ellensburg, a 
distance of 130 miles, was completed, and in 1887, 95 peers road 
were built in Dakota extending from Grand Forks to Pembina. 

In 1880 the average number of miles it operated was 722, 
and in 1886 it was 2,718. In 1889, it had 2,170.4 miles of main 


line and 1,091.1 miles of leased lines in operation. 


59. American Railroad Journal, 1883, p.51. 
60. Railroad Age Gazette, 1887, p.725. 


a 


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31 


The Southern Pacific during these years practically 
completed a line of railroad from San Francisco to New Orleans. 
The line between these two points--the waters of the Pacific and 
the Gulf of Mexico, was designated by eastern men as the "Sunset 
route". ‘the entire length from San Francisco to New Orleans was 
2,470 miles. ‘the length within the boundaries of Arizona was over | 
400 miles. Since the building of the road, many towns and mining 
camps had sprung up in the country adjacent; an army of traders 
and speculators had filled the southern counties and the steadily 
increasing volume of bullion which was finding its way out of the 
country, was suggestive of the response other portions of the 
territory would give to rail communication. Therefore, the com- 
pletion of the Southern Pacific Railroad across Arizona marked a 
new era in the history of the territory. Since the construction 
of the Southern Pacific was so important to the economic develop- 
ment of Arizona, it would be equally advantageous to the other 
territories which it traversed. 

In 1885, a consolidation of the southern Pacific eer 
controlled lines and extensions east @f El Paso was completed. 

The consolidated line was composed of the following roads: The 
Southern Pacific of California; Southern Pacific of Arizona; South 
ern Pacific of New Mexico; Galveston, Harrisburg and San Antonio; 


Louisiana, Western Texas and New Orleans; and Morgan's Louisiana 


61. Railroad Age Gazette, 1885, p.160. 


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and Texas Railway and Steamship lines. The lines were consolidated 
under the name Southern Pacific Company, with headquarters at San 
Francisco, California. It was divided into two divisions; all wesf 
of El Paso would be known as the Pacific System, and all east there 
of as the Atlantic System. At the end of 1886 the mileage of its 
Pacific System had climbed to 3,138.98, and its Atlantic System to 
1,607.55, a total of gaat In March, 1889, the reported 
length of its lines was 4,976.23. 

The Union Pacific expanded its system during the ninth 
decade partly by purchases or consolidations, and partly by cons- 
tructing, The average length of lines operated by its system was 
2,706.30 in 1880 and 4,518.13 in 1886. The reported mileage of its 
system in May, 1889, was 5,134.3 miles, subdivided as follows: 
Nebraska division, 8,953; Wyoming division, 687.2; Kansas division, 
1,019.4; Salt Lake and Western, 57.2; Motana Union, 61; Utah 
Central 285.5; Utah and Neveda, 37. 


62. Ringwalt, Development of Transportation System in the United 
States, p.557 e 


— ~ a 


Metabifcaroo e1ev sentl etT ,oentl qiriamaes’’ Soe yam 
mee t2 cxreftouphess diiv ,ynequo® s£tiost axedzags 
deew [fn junolalvih owt ont bobivad aaw Sl Jateaen 
donens taes (fe ban ,nedeye ofttost eid ae cwornl | 
agi to enrelin edt 368% to ine of? g& 
of meveve ofsmaltA ast Boe ,80. BERGE oF 
hadroces eft ,280' dors wh .t2, a> 
fo, d72,> saw 
finin eft nativh metoge ett bebseree’ olthagt ‘ron 
-aos \d ylraad bose ,anotiabliosnos 10 eemee 7 
eow ostaye ett ut Setereqo sentl to sages 
esi to exeelim hetsoqges efT 9881 nl Chee ye 
sewolLot as behiviftdus ,selia &.h00 2 Ga 
piaeietvih ssenst ;£, 785 ee gi imoyl ECR Oe oh 
fied 343 ,molav acsnseit iS.3@ ,mroetaeh Saa 
Te caleyer ome 


CHAPTER IIT 


Consolidation of Railways 


(A) Causes of Consolidation 


One of the causes of railway consolidation was seen 


through out the whole business world. Railway corporations, like 


other industrial concerns, found that where the large and strong 


organization supplanted the small one, greater business might be 
1 
expected, expenses reduced, and profits increased. In compliance 


with this economic principle, railway companies have striven for 


wide expansion. Within limits of efficient control the larger they 


are and the wider their territory, the safer and more reliable is 


their business. 


The second cause of railway consolidation was the aboli- 


Competition led to most of the evils 


tion of excessive competition. 


that befell American railways. It caused constant rate wars. There 


were too many railroads, too many hostile interests; and it is quite 


natural that reduction of their number was attempted. Whenever one 


company begins underbidding another in the matter of rates, compe- 


tition is extremely ruthless, and the consequences are disastrous 


to both parties. If the competiton among them is to be restrained, 


If they cannot agree 


they must either co-operate or consolidate. 


upon, and work in accordance with business methods that will effec- 


tually restrain the forces which lead to reckless competition, they 


1. Johnson and Van Metre, Principles of Railroad Transportation, 
Dp. ote. 


cc 


Iti SETTAHO 


syeniled to aolszabiLtosnod & 


& 


“uolsgabl 
~y 
meen aew noltaitfioaned yaw line te coauao oft 


“ 


el{ ,enoliexcetoo yewile  Bivow csenlaud efemee 


yi 


J) Soe eatal edt evadw Jadi Bapot ,eriesaogy 
ec digi caetlesd sefseia ,eno Ilame eff bese 


eomeifomos al .biseseront edltosq bod _bsoubed 


é d 
sah 

ovinve evad seinaqaos yewilar .eiqionteg Pe 
. 

covtal edt Loxton dtietolite to atfail Wem 


Ef e-dsilet etom hae teTse est ,viotitded shade 


“ii0cS od saw coléshlifosres Yew lex To enuao 
re oe te feom oF bei wistitegmo? .,aolis teqmes 

ow ete4n Snatdenoo beawed JI -2YewL ox 
lip al ® ;efeetstal oftreot wren ood ube 


-Dbatqmetie sew tedaun thedt to mek 


~] 


on 150081 To tettem oft nt ted¢gone aathitdaeeee f 
? < 


“afb o12 seoveupeenoo edd bar ,et5eliduaee 


eijeet of OF Bf mend gnomes sottieqmos emt Ts 8 
“a *e 


Se7T5s ccunso Yort TL ,eseabltoaencs <6 aT BteT0-00 


S-i6 i1lW Zand epottes asentaud deity eonabhiooba alt 


Yea! ,aoltvideqmo» sealioe: of Bast Holdw spore? ens at 


_ 


' 7 » 4 te ; : 
Meliseyousnet? Deoritsh ts pederogsnd sotto nav) das 
; » “@ : - os 


SSS Se eer 
a 


ae a» 
~~ 


must consolidate under a single ownership. There is no other 
alternative. The most notable instance of this sort was the conso- 
lidation of the Galena and Chicago, and the Chicago and Milwaukee, 
in the Chicago and Northwestern in jaca The fundamental purpose 
of this consolidation was the elimination of competition, The New 
Jersey Railroad, operating between Jersey City and New Brunswick, 
was im competition with the Camden amboy. For the purpose of eli- 


minating competition, the Jersey Railroad was taken over in 1867 as 


3 
a constituent in the United Railroads of New Jersey. 


The their cause of railway consolidation was the thirst 
after power, which characterizes most railway managers. In order 
to gecure business, war was not only conducted openly by means of 
competition, but it was also carried on secretly; and railroad 
managers schemed one against the other with the object of obtaining 
power. Every railroad manager was permeated with a desire to make 
his system great, to oust his rivals; and this desire prompted his 
every action. Consequently railroad presidents were always attack- 
ing others and defending themselves. There was a constant struggle 
not only for life, but also for supremacy. An instance of this 
kind was found in the Gould's combination for the control of trans- 
continental lines. In 1879, before this consolidation, Gould con- 
trolled only the Union Pacific. Subsequently he practically owned 


over twenty western lines. He held in his hands the destinies of 


2. Robinson, M. H. The Holding Corporation, pp. 15-16. 
3. Cleveland and Powell, Railroad Finance, p.289. 


(lL aa At ig 


,e8c. a 


~ ys 


‘i~cl .qG -Motteseqo) sath fol en? .H Mt 108 
gonentt Seogiieah ,lfewol one bas nas 
, tg 


eve eee pe 


roltentotte ony BA i nots shite 


is ;elavig eld tevo oF a 
iT ,aevleegens yothneteb Be 
tolsentidmos a’ Sivod edd Py 

~* 


tpeedwe ,9fitosl nota eit 


Te. wa 


= 


noewied 'tetoqe,Be6 


nefrs) ect Avie Holes : 
Tee iet ext rotted Tmo 
neve ff akl bes dnd erie nt sree 
wlrtet To eames diem 
i sitiretJostedo ASI 


¥iao Jon caw tew , neon ti 


: aorlie: _ylineuvpsenov 
17ue tot cals Sud ea eee % 
[fay e1oted -,.eyaT nal eontl g 


at bleti oi .eenltl atetsoew 


D5 


the Union Pacific, Kansas Pacific, Wabash, St. Louis, Kansas City 
and Northern, Missouri Pacific, St. Joseph and Denver, Colorado 
Central, Utah Southern, St. Louis and San Francisco Co., Paris and 
Danville, Peoria, Pekin and Jacksonville, Chicago and Paducah, 
Chicago and Strawn, Denver and South Park, Denver and Rio Grande, 
Hannibal and St. Joseph, Denver Pacific, Detroit and Eel River, and 
others of minor importance. The primary cause of this combination 
was evident. It was the decision to crush out all competition 
against the Union Pacific, and to prevent the construction of other 
lines to the Pacific Coast not controlled by himself. His tactics 
were directed principally against the Boston syndicate which con- 
trolled the Chicago, Burlington and Quincy, Burlington and Missour1l 
River in Nebraska, and Atchison, Topeka and Santa Fé, and which was 
pushing the latter rapidly to the Pacific Coast. The assumption of 
control of the Denver and Rio Grande was to prevent the Atchison, 
Topeka and Santa Fé from entering Leadville and other important 
Colorado mining points. Furthermore, Govld permitted Vanderbilt 

to gobble up the Erie and obtain control ot the Canadian lines and 
in return Vanderbilt aided Gould in getting control of all the 
western roads east of California and the Pacific Coast. Gould 
would give his business in the East to Vanderbilt, and Vanderbilt 
was to give the western to outs Such was the method of a rail- 


road manager in ousting a rival. 


4. American Railroad Journal, 1879, p.1,318. 


. 2 % ; : a ae) part. ase 


ha eee eae ee = mee - 


. 


J z r = ; 4 i? ed all 0s 7 ce Ba t serena t oftiost 
[oD .tevaed fimesot .%8 ,oftieat Ivosalie ym 


' 5 pixel .. tome? e elvot .f8@ ,areddavong 


,~ebn yu ma tsva tel drvue bos tovael. nwaetiaiae eS 


a 
. «7 onT v.eonatrodqest 
, 


Liiteqmoo ffs ferro ot motetoeS eft gaw 21 eam 
its vsicouvanog ef) tueverwc oF baa» :ofT2oRT Bee 


J . tieend ra be f Lowder s02 olftfogt ea 


- 


’ =<f00 dot. sjaclbayes tlogvech od tanlase Yilecisoaiae ros 
: 


> - . 
= 2 : si ryre LS a4 


s yMoalsaota ecit fae og * ehrerd off bos stoves 
i] e o la 
| aa 


daar »ilivbesl goitedae moxt 6% sane 
| @ildnsehre’ betdlatoc of ,stoatediivl .,adniog mm 


/ ° 7 - * . . ee 
|; O18 wt [ telbensy eis to Ioténoo atatdo hae sia eae 

- —- 
2: i# 20 fotsnoo gattseg mf Ofued bebla SIiidaee 


oD ,taao? oftios? ei? fae ehrtetited te) daae 
oy 


as ,titdrebasV¥ o¢ jusivenlf al esenised sie 


- 


ey oft aew dove Aivod of nusteew offs ae 
b>. 


(iro eee 
é 
) 
4 


Levin # antteno Rios 


~ ae 
“asl? 


SEES Ua 

A 
va 
i 
~A 
% 
“~ 
e 

o 
wu 


36 


lhe final cause of railroad consolidation was the law 
enactment of 1866. After the difficulty experienced by the federal 
government in obtaining continuous transportation of troops and 
military supplies, Congress had passed a law which granted to every 
railroad the right to carry persons and any property from any state 
into another state, "and to connect with roads of other states so ag 
to form continuous lines....... eto the rlace of destination" unhan- 
pered by state laws. This law had an undoubted influence in usher- 
ing in the period of trunk line development. The immediate cause 
was the increasing rivalry for through tratfic between the Pennsyl- 
vania, the Erie, and the New York men In 1869, therefore, the 
Columbus, Chicago and Indiana Central was leased by the Pittsburgh, 
Cincinnatg and St. Louis in the interest or the Pennsylvania, which 
thereby gained control ot a through line to St. Louis and Chicago. 
In 1872 a second route to St. Louis was acquired through the lease 
of the St. Louis, Vandalia, and Terre Haute by the Terre Haute and 
Indianapolis, in which the Pennsylvania had a half interest. In 
1869, also, Cornelius Vanderbilt united the several lines connect- 
ing Buffalo with Chicago in the Lake Shore and Michigan Southern 
Railroad, and consolidated the New York Central with the Hudson 
River Railroad, thus establishing a through route from New York to 
Chicago. ‘ithe Erie, between 1868 and 1874, took over the Atlantic 
and Great Western under various leases, thus extending its control 


as far west as Dayton, but it did not get an independent entrance 


5. Statute at Large XIV, p.66. 
6. Cleveland and rowell, Kailroad Finance, p.276. 


* 


wah 


a fe + , 
Ast ent 5 


= ; 7 
‘ . — a 
+ foemios of Dns” setede emia 
P. B a 7 } 7 
* ms “aa ave j > " 
Wal wpe sees * ® oTli tJ BLOM stones als _ 
° , i 
'D. 3 ij 
" - aad — [ 
rofl ef elsT owal odes tt 
iW 
} 
4 
i 
a 
fi 
; 


j 


| 
. 
| 


—- - A 
ni 


3 


ii 
into Chicago until 1883 when the Chicago and Atlantic was opened. 


While the movement had been inaugurated with a view to facilita- 


ting transportation, the system thus created soon found a much 


stronger motive to consolidation in the suppression of competition 


The consolidation ot competing railroads, whether parallel or 


otherwise, had gone on very rapidly. The New rork, New Haven and 


Hartford may be cited as a system which has been puilt up through 
8 


the consolidation of lines many of which were natural competitors. 


The New vork Central in 1885 tound it necessary to get control of 


the West Shore as it was a direct competitor of the system; and 


tor the same reason, the Laxe Shore, in 1887 took over the New 


York, Chicago, and St. Louis, which paralieled its line throughout 


its entire length. 


(B) Examples ot Varieties of Consolidation 


The consolidations have been brought about by various 


ways. The most common form is the merger, or the absorption of 


one or more corporations by another which retains its corporate 


existence unchanged save through modiitications ordered in tne en- 


abling act. The typical example ot this kind was the taking-over 


in 1885, by the Galena and Chicago Union of the Mississippi and 


Rock River Junction Railroad. The shares of these two companies 
Lil 


were blended into one capital stock in the name of the Chicago 


9 
and Galena Union. Another instance which may be cited is in 1880 


7. Cleveland and Powell, Railroad Finance, p.277. 


S, Abid., P.2TT 
6. tbid., p.291. 


38 


the Kansas Pacific and the Denver Pacific were merged in the Union 


Pacific. 


Another form of railroad consolidation was share-ownership. 


A railroad company may hold shares of another company either for 


purposes of investment or to secure control of subsidiary properties 


Shares-for control may be obtained in various ways. They may be 


purchased upon the market or directly from individual share-holders, 


or they may be taken over in accordance with a formal agreement 


Through the purchase of 


providing for the exchange of securities. 


the shares of the Alton and St. Louis, the Chicago and Alton finally 
10 


in 1867 gained full control of that company. In 1881 a contest for 


the control of Philadelphia, Wilmington, and Baltimore was engaged 


between the Baltimore and Ohio, and the Pennsylvania, but the 


contest, at last, was won by the Pennsylvania at a cost of about 


sixteen millions in cash. Part of this sum was subsequently made 


up by means of a bond issue, and part through the sale of new 


shares. When control is acquired by means of an exchange of shares 
11 


an increase of capitalization is necessary. 


Acquisition of control is simplified in cases where a largé¢ 


The Richmond 


| 


and Danville acquired control of the Northwestern of Georgia in 183} 


block of shares may be purchased from a single holder. 


through a purchase of the majority interest held by the city of 


Athens. In 1883, the Chicago, Burlington and Quincy obtained from 


10. Cleveland and Powell, Railroad Finance, p.293. 


ine Lbid «4. p.299% 


Fie 


WolnU ext cl beater stew oltios’ xevned eff Bas oitis 


~cirtetenwo-eteads ser noitabitoenos Broillet Io mier 
“ol teci¢ie ynseqmoe tedvone to seteda Slot Gar 


epetinecort yielblecus bo foawtmoo edvosse of TOs 


— 


oye” sveltey ab Bentesdo of 5 
,etef (od-etera fauhbivibat moTtl gies te 


wl 
- 


ed Vaw ¥ 


fnewse ms [eaiol @« fevlw sanebrosoe wh tere. 
to seeno wy ed? dyveTd? ,selticuwhes Ta aeneee 


gifent? mosiA base opeoltdd ont ,etuoal 428 Qe 
o 
at 


sOt fsotmps ; ree ail .Yneqnoo feds te Lottaed! 
hespeaite sew etonmltio&® bag ,nosantal Pie 
enc tod ,atineviyotnet eff bone ,olad Ba6 
Juecda Yo taco 2 da alnzuviyenned eat vd Sor Bae 


ofue Yisacupesdve ecw mie elat to dag Cee 


wen to ofee oft cawontt ¢caqd Boe ,ettesd heed 


reetaie lo sagnsrioxe oe Yo ensem ¥d Hetlupos . at 
ri 


-Utaceeoen ef nolvacl 


Patfi £4 eteuw senso af Beltifomts ef Loesoo te 


puomioli esl .wehiod elanta 2 mod hevedouwy ef Yea et 


r — 
, fe 7 


fil slyiesS to mietoewhtaol eft to Conines Derk 


Jio oiy Yo Bled seetetal Yinelam ens to. es 


“— 


moti becteddo Yortu® Dre Aotuet fave jomes ket eae nue 


COS. 0 eonents Seoctiah ,liewol bua | 


ORS er 
: avs) _ 
he a ; 


es. a - 
= tl 


@ 


— 


ag 


Jay Gould a controlling interest in the Hannibal and St. Joseph; 


and in 1889 a syndicate representing the Cleveland, Cincinnati, 


Chicago and St. Louis purchased control of the Chesapeake, and Ohio 
| from Collis P. Huntington. 


Owing to the popular opposition to actual consolidation, 

| Which,has been active in such states as Texas and Minnesota, con- 
solidation has taken place by means of lease. The period for which 
a lease may run varies. The term may be for only a few years; it 

| may extend to the end of the corporate exestence of the lessee; or | 
it may be specifically without limit as to time. Some leases sti- 
pulate that a fixed annual rental shall be paid, and others fix a | 
progressive rental, or make it proportionate to either gross or 

net earnings of the leased line. An instance of this kind was the 
lease of the Jeffersonville and Indianapolis Railroad Pe the 
Madison Branch by the Pennsylvania Railroad Company in 1871; and 
in 1879, by means of lease, the Indianapolis and Vincennes Railroad 


14 
was brought under the control of the Pennsylvania Railroad Company. 


Some lines, such as the Philadelvhia and Erie, the Harrisburg and | 
Lancester, were leased by the Pennsylvania Railroad Company with a | 
term of 999 ne 

It is undeniable that long tern leases are frequently 


succeeded by mergers; the lessee thereby surrenders its corporate 


identity, as in the case of the merger of the Beloit and Madison 


12. Cleveland and Powell, Railroad Finance, p.298. 


13. American Railroad Journal, 1871, p.818. 


1m, Ibid, 1879, D.25. 


15. Cleveland and Powell, Railroad Finance, p.300. 


tteonol .f5 Bie Laclwek ent af fostedal aatitoammes 
-Iteotfon!> .buelevelS ec? gu fea@esetees @cesioneeaee 


bne .oxfecdecedy ets 2 fottnes beeadougd alvod 
i. { 
a 


10 teeta 

obkfebt feu mS. ‘sutse Of aobsleoggo taluqed eit ty 
,wfovwntll fae sexel @a-csfage move nk ov bi 
tot bolieg el? .ssea0ef To onpes YW soatg 
iaxsey ¥e2 2 ¥Ite 10% ed Yan sat saan 


of acs to sdneteexe 9taiegies 6f3 “Tose 


(ja seenrel sano! s j od ge tim tl seforitle 4 


ry = ‘err od Lite Lednes feurina 


i- 
4 
te) 
5 
“ 
, 
“4 


aa ioqeng ¢1 Ofam Tada 
} BAT id 8 -_ pomavent nA ontt heasel 
fish ellodanelial Bae eLliveeas 
kt wi yneceot heogftex atcev ivanell ect 

i sorineunl!Y Swe 21 fogqmatial 64% esaen- 20 

1 Bar ‘an alaaviysanet eff te Lonéaoo ena 
s yitnicial ed? .stul fos akeeteie leds eee 


7 al 


iftasA alneviysceel ers ed bemeee 


& teees!l myed unol Jed’ eideianging 
LoTIuo 2°72 etehaswive ydetane oeetel ett gaten 


loelbeii bus glofell odd Ge xonten ed¢ to ebad 9 edd ah 


“v at 


.22S,¢ ,epgent®. Seortian Tiewod bas 
8tS.0. ETSI Saeaete 297 

y | 2560 OT 

,008,q Oomenit beorkt si LLomot bea 2 


SEE ——————eee 


40 


by the Chicago and Northwestern in 1871. In 1879 the Chicago, Mil - 
waukee, and St. Paul came into possession of the entire share 
capital of the Western Union Railroad, in which it had owned a 
majority interest for ten years. Under the laws of Iliinois it was 
unable to take over the property by direct conveyance, it executed 
a lease for a nominal consideration for a term of 999 one 
(C) Results 

By the process of consolidation, the principal results 
have been economy and a decrease of hostilities. It was apparent 
that consolidation would effect great savings to railways. How 
different matters would be if a large number of small companies 
continued to lead separate corporate existences instead of being 
united into one homogeneous system. Could economy be effected? in 
the matter of consolidation, instead of scores of main offices with 
a corresponding number of sets of officials there is but one larger} 
it is true than any of the small companies would require, but con- 
siderably cheaper tnan the total that would have been required by 
numerous smaller companies. Furthermore, there must be an impor- 
tant saving in the purchase of supplies; they are bought in large 
quantities, and the large company can have its own coal mines, its 
own workshops, and its own locomotive works, while it can maintain 
permanent staffs of laborers and employees. All of this is in- 


possible for small companies. 


16. Cleveland ana Powell, Railroad Finance, p.316. 


~ 2M ,omrotd? eng OT6! mI .P76T ah mpeduendicol Bae 
| u te ortine edt to sotesseaca off! omao [ust 2 
» fenwo bert J! dolcw at ,beotlieh noial euageen 
isi $2 etontili_to- swat ef@ @05aU .sta8y Hediags _ 
betuoexe Ji ,sonaysvneo Foetld yd YWredotg sid we "i 
.euher G62 le mie? 2 203 pebtateblescs ao 


silueot Lasioniaa eff ,noldabLiounase te 


Jneitscce set 21 ,eeltiitiveaed to seeeaet 2 Bae 


‘ 
s 


voh .syawlies of synives ta0ny PFoeTTe BR 
aeineaqnos Ifizme Yo tedsum ental & Bice bluow 
aifec to hasdeal sesonmetaize etztoqteo seeianee 
Mm. fhetocite ec ynotose blyo® ,sedage exe 
fitiw ceoltto alee ‘lo senoos te Baovere wmolseBnn 
gtepint oo dud et eteds sflaleltio 2o eden. id 
“too Jud ,etiupe: Aivow eelaeqmoo Eflese ed? t6-% 
q bexrtupet meed sven Sivow tet? Iedod end aged 
“oom iB od tsum stent ,eromieddust .eelnteqnos 
opisi al tdaued ete yeds jeeilqgque To esanoid 
eds ,zenia Leoo awo agi eyvad neo Yrees eniel ear 
Mietniem cao Jt elidw .pt ow evisonooel awe ett bas 
emai el-ala’d to [Lk ,seeyoiquie Dis eusvedai te aaa | 
os liequod flame 


<9 
, 
. 


SIL.¢ .Q00RmeT Anogtial ,Liewot oth F 


In the second place consolidation produces harmony. Rate 


war between great systems is not a trifling matter. Hostilities 


between the two great systems known as the Pennsylvania and Van- 


derbilt lines naturally are far less frequent than they were in the 


days when over a hundred small lines occupied the places of the 
17 
present two. 


Consolidation, like every form of combination, by exclud- 


ing competition, prevents discriminations. The elimination of the 


power to compete eliminates the inducement to discriminate. When 


a railroad controls all the traffic, there is no necessity for 


granting rebates or preferential rates to the shippers. Consoli- 


dation, therefore, tends to make rates just and reasonable. 


Greater facility in the working of railroads is also one 


of the results of consolidation, Formerly many a small railroad 


had either too much rolling stock or not enough, and the result as 


a rule was extravagant expenditure. As in matter of consolidation, 


the condition is defferent. Ona large railroad system business 


varies according to seasons, divisions and periods; but staff and 


rolling stock can always be profitably employed somewhere and the 


strain sometimes placed upon special varts can be relieved without 


extra expense or loss of business. Thus a waste of energy is pre- 


vented, a better service maintained, and great savings are the 


result. 


17. Johnson and Van Metre, Principles of Railroad Transportation, 
pet7O. 


~q ctoljaiilCoeneo essai bnooes elf Be 


lvls? 2 Jon al sengoyeys Jeers 


‘¢ mom auefays teeta. am 


pest eael tat etV0e Yi lesa 
: ~@ 


- othe ole sectf yl lana DSetbasa & 


——— 


Bean: J to stot Yeeve etti ,molsaps 
: ltaniatioe lb etacvetgl 

«Sd tmeasosovSat ed? notentetts oa 

ered’ ,col?ieuwt edd Lf alo’ 

= ~eteoga. mi? of sovet Laelinetsieowe ae 


: » 
eld eet bua Jdeul sete t etiam of shined (eam 


a » 
ai sects oO atin‘tow off AL vIIiiog? otae" 
" _re ¢ + er asl 
‘remr10s ,notésabifosnes Fe 


~ 
ad 
* 

“4 


sHOLS moo j af sh ,wenuriihnecxes tdapgev 


st emiet a nO ,tnenvetteb af 


Fre ce > Se — 4 
Bris tata : sabol is scofelyih .eaesszea oF BEE 
ery 


as 


| 
. 
| iJ ‘8 Stetwenos f otqme yYideritoiww sd BYfwle wes 3 
( m : 


TuOusin Seveliex ma9 aéxeq LTafosqe soqu Bbeosia’ seme 


ety ef yaicme to oteew 2 eiHT .coeatemt to eaol 40m 


%, 
\ rid Lo aBifves isety bore ,banlacntam eotyies t0dd 
5 7 ma] 


CHAPTER IV 


Railroad Capital 


(A) Expansion of Capital and Methods of Financing 

The mileage of the railroad system of the United States 
at the end of 1870 was 5,000; the permanent investment was esti- 
mated at less than $275,000,000, though it must be admitted that a 


1 
considerable portion of this was foreign capital. The expansion 


of the railroad system during the eighth decade was 87,801.42 miles; 


the reported cost of the permanent investment of this property was 


$5,425,722,559.64 which was represented by $2,613,606, 264.45 of 


capital stock, $2,390,915,401.63 of funded debt, and $421,200,895.5 
2 


of unfunded debt. The increased mileage during the first five 
years of the ninth decade was 40,759 miles, while the capital in- 
vestment increased to $2,804,381,537, this increase consisting of 
an increase of 57.1 ver cent in capital stock, 58.2 per cent in 
funded debt, and 56 per cent in other forms of indebtedness. In 
the five years ending with 1890 railroad mileage increased 39,670 
miles, the capital investment increased $2,446,236,846, this in- 
Crease in investment consisted of an increase of 19.5 per cent in 
capital stock, 31.6 per cent in funded debt, and 46.1 per cent in 


other forms of indebtedness. 


1. Railroad Gazette, 1872, p.375. 


2. Ringwalt, Development of Transportation System in the United 
States, p.241. 


VI ARTSARD 


Pah hnmen kT Bee as | 
fatical Bsorl hail 


atine s: *, inenagied adv ;000,.2 san GFBE 

a a ' ’ ae "0 0,000 ,AaTs¢ eri a 
: | terol auw elay to aeleee 
ey Ce, 


: 
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; 7 


I : : = F 7 
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ea Naas — 
id , TES, £88, $08, 38 OF Bom 


¥ 

rh + P *s ‘ : P r e H vé | : 
ft TES te Be L » Pee ed zi A. Jiqéo wt gos 1980 .; - 4 
a] - ; | 
: hock Le 101 tedto mt dmeo Nec 66 Bae 


} : Seee onl enzolla Bbeorllat OeBf aéie zc tine "S 
[ :? i ta a" ' ; , — 
st ‘ as bbe ¢ Ps he bee retor! sneusteevee fatia 9 


i ine Y. to eesetonl ne to bevelenoo Juentaen 


— 


a 
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. 
oy 
~- 
o~ 
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’ 
~ 
r 


af sneo seq 0, ff 4 to 
a 


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ele. ¢ STSh. 1= 
bhosiow ent nmi peavey gsobtse tognipenT te sym! 


Si Sarin Gees ee ks 


fa 
i 


+2 


The following statement shows the increase in share 


3 
States,from 1880-1890. 


capital, funded debt and unfunded debt of the railroads of United 


376, 494, 297 


a3. Poor's Manual of Railroads, 1890,: pp. 12-13.° 


| 
i 
| Year| Capital Stock Per= | Funded Funded Per= 
| stock. Increase. cent. | debt. debt cent. 
Inerease. 
| 3 $ $ $ 
i . ; te SITE a eae a 
| 2,708,673, 375 |313, 026,082 |11. 50) 2,530, 874, 948] 211,385,771) 8.35 
8,177,375,179 | 468,701, 804 |14.'70| 2,878, 428, 606] 347, 548, 663 |12.410 
| 8,511,035, 824/333, 660,645 | 9.50) 3, 235,543, 323| 357,119, 717 |11.10 
| po, (06, 060, 583 |19%, 024,759 | 5.30] 3,500, 879,914 205,0560,5091) 7.60 
3,762,616,686| 54,556,103] 1.45] 3,669,115, 772] 168, 235,858! 4.60 
8,817,697,832| 55,081,146 | 1.44) 3,765,727,066| 96,611,294! 2.60 
3,999,508, 508/)181,810,676 | 4.50] 3,882, 966, 330 117, 239, 264 | 3.00 
. 4,191,562, 029/ 192,053,521 | 4.60| 4,186,943, 116 303,976,786] 7.30 
| 4,488,411, 342| 246,849,313 | 5.60] 4, 624, 035,023] 437,091,907) 9.50 
4,495,099, 318/566, 879,976 |13.00| 4,828, 865, 771] 204, 330, 748 4.20 
4,640, 239,578/145,140, 260} 3.10) 5,105, 902,025 Sli, 000; cod | 5.46 
= a =a hate | i 
Unfunded debt.) Unfunded debt} Per- Total | Pers 
Increase. cent. Increase. cent, 
$ $ $ a! 
162, 489, 939 5,608,887  |35.00 | 530,020,740 9.30 
abe, 106,267 60, 276, 828 27.00 876,526,795 13.99 
270,470,972 | 47,404,695 |17.50 | 738,485,057 | 10.50 
268, 925, 285 1,245,677 0.46 | 461,415,673 6.16 
| 244, 666, 596 24,258, 649 Jeue 198,533,272 2805 
259,108, 281 14,441,685 5.60 166,134 9925 Zelda 
280,673, 814 Zio .oa6 hal 320, 615,473 3.93 
294,682,071 | 14,008, 257 4.75 | 510,038,564 5.88 
306,952,589 | 12,270,578 4.00 | 606,211,738 | 6.48 
357,477,160 50,524,571 14,.00 311,543,295 | Steed, 
19,017,137 5.05 | 441,698,651 | 4286 


SOEs | ee es 


a ee ats ok S “eed he er 
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1) <7, 3% 


The means for the construction of the railroads of the 
United States were originally supplied from sales of, or subscrip- 
tions to, their shares and bonds, in pretty equal proportions. The 
capital stock of American railroads are of two general classes, 
Preferred stock and Common stock. Preferred stock is issued to 
secure additional capital when the original shareholders are unable 
to furnish the full amount of capital necessary to complete the 
work of construction and equipment. It offers a special inducement 
to investors. Although there is no limit to the variety of prefer 
ments which may be offered, there may be said to be three general 
classes, (1) preferment as to dividend; (2) preferment as to re- 
turn of capital upon dissolution; and (3) preferment as to voting 
power at shareholder's eee To any or all of these classes 
of shares there may be granted in addition, certain privileges as 
to the conversion of shares into bonds, or as to the subscription 
to additional issues of shares or convertible bonds at lower 
prices than are available to outsiders. 

Common stocks constitute by far the largest part of rail- 
road capital of American railroad companies. Holders of common 
stock are the “residual claimants" to the surplus income of the 
corporation. Having no claim to a stipulated return, they receive 
dividends only after all interest charges and dividends on pre- 
ferred stocks have been a 


Besides capital stocks, various classes of bonds are issued 


4. Cleveland and Powell, Railroad Finance, p.40. 


5. Sakolski, A. M., American Railroad Economics, p.29. 


PO L255 2 


be 


. 
. 
i 
‘peews 
u*4 64 
¢ tc? 
. 


ehnod 


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otietett deve conmod) Bag aie 
Oe = ——s te - 
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Y of timtl! og el grecis cavotr te i 
fee of Yom ex erly beretio ede oo 


tewy (S) jhrebtvrb of os SASREeRee 
Ss ae 


fers (€) Bane ;notspionals Noqe a 


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suitors eid oF "“oinanlels IRubisen" 


fox Deselugite «2 of mlato on satvall a 
Vin ne aepiadd teedvegak Eis stotte yin 
2 : ; 


,tenr mwed evad. 


. 


© S05858.9 evottay  etoote Latiqas 


by railroad companies to secure capital. They are the mortgage bonds 
collateral trust bonds, convertible bonds, debenture bonds and in- 
come bonds. The mortgage bond is an obligation secured by a lien 

on some specific and tangible property. It usually bears a fixed 
rate of interest and matures after a definite period. The mortgage 
bonds are variously named as Prior Lien, First Mortgage, Second Mort 
gage, Third Mortgage etc. The difference between a first mortgage 
and second mortgage is readily understood. The investors may be 
misled through the names of bond issues, Thus the Toledo, St. Louis 
and Western Railroad had a 3.5 per cent Prior Lien Bond issue of 
$9,500,000 and a 4 per cent First Mortgage Bond issue of $6,500,000, 
The:latter, however, constitutes an inferior mortgage on the property 
securing the Prior Lien Bonds. 

Collateral Trust Bonds differ in one essential particular 
from mortgage bonds. It is a mortgage secured, not by any real 
property or franchise but by the deposit of stocks or bonds of other 
companies with a designated trustee. The investment value of colla- 
teral trust bonds depends, first, upon the intrinsic value of the 


pledged securities, and secondly, upon the general credit and finan- 


7 
cial standing of the company pledging the security. In case the 


bondholder fails to receive his interest and principle, the trustee 
is authorized to sell the securities pledged. The first use of the 


collateral trust bond was by the Union Pacific, the proceeds of 


6. Sakolski, A. M., American Railroad Economics, p.35. 


een ideo (Pp «39 


a 


ee ee 


-28.¢ .solmonool Beoni tet naotyems i a 


My on inela! as esdutigencoo + 


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.laliqac etrose 6) solinequege 
my 
» Bs ‘ ole létevynios ,ebrtod saw 


itealido as af Bbaod exaegdaem 


age 


ri 6 Ydreqdon¢ eit igaar Gag 


siinites 2 sett4 setptan BAe 
—— a 


7%: 


fo ,wehl toltt es Semar VW 


culeteTILh sif ote Samm 


‘7% 


qT ,boadsyebar Ylibeet BE 


» 
coteT tmeo req #,© & hed Seem 


aoe syendiol ¢eatt? taes Vege 


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emcee opEusvom #£ a2 3D) Jee 
to ffsoqeh sit ye Sod ee lie 
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bondsla seolttavoesr eft Lies Bi 


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8 
which were used to construct branch lines or extensions. 


Convertible bonds are similar to other railroad bonds. 
They are a direct obligation of the issuing company maturing ina 
certain period of time and bearing a fixed rate of interest. The 
holders, in addition, have the privilege of exchanging them for a 
class of capital stock of the issuing company under prescribed 
conditions and terms. 


Debenture bonds issued by railroad companies are without 


al 
specific property pledged for their securites. The issuance of 


these bonds is to depend upon the faith and general credit of the 
company. Because of no definite pledge of property, debenture bondg 
are issued and sold mainly by the richest and strongest of the 
railroad companies. 

Income bonds are generally known as "adjustment" bonds, 
from the fact that they are generally created at reorganizations in 


which a financial adjustment is accomplished by reduction in fixed 


charges. Holders of second or junior lien bonds may then be per- 
mitted to exchange their holdings for income bonds. Unlike other 
classes of bonds, income bonds are based on the earnings of a 
corporation. They have preference over stock, but the interest 
does not have to be paid if it is not earned, These bonds, there- 
fore, as a Claimant of profits are in much the same way as pre- 
ferred stocks. 
(B) Relation to Costs 

In an early portion of 1866 the American Railroad Journal 


published the following estimate of the mileage and cost of the 


8. Ripley, W. Z., Railroad Finance and Organization, p.145. 


: =o 
WILE ON O: 
* * — 


47 


railways of the United States shortly after the close of the war. 
Thé total mileage at that period including projected or partly 
finished lines was 51,284.87; completed lines, 35,316.40; the 
total cost of road was $1,388,555,268 and the average cost per 
mile was $38,998. By the end of 1869 the mileage operated in the 
United States had increased to 43,510.43 and the total cost oi the 
railroads was estimated at about $2,212,412,719, and the average 
cost per mile, $45,998.90. The total length of the railroads in 
the United States at the end of 1880 was 92,147 miles. The aggre 
gate cost of these roads was $5,402,037,257, and the average cost 
per mile was Te ae 

The total length of the railroads in the United States, 
in 1890, was reported 163,420 miles against 92,149 miles in 1880, 
43,510.43 miles for 1869, and 35,316.49 for 1866. The cost of 
the railroads of the country would average $61,942.45 to the mile, 
the total for the 163,420 miles, being in round numbers, $10,122, 
639,500. The increase of the year over that for 1880 was $4,720, 
598,643, while that of 1880 over 1870 was $3,189,624,438; of the 
total cost $4,640,239,578 was made up of share capital, and $5,105 


902,025 of funded debt and 4376,494,297 of other debt. The aver- 


age cost per mile of all the roads was $61,942.45 against #59 +709 


35 per mile in 1880, $45,980.90 for 1869 and 438,998 for 1866. 


11. Poor's Manual of Railroads, 1891, p31. 


Se 


a 2 ee 


61,29 new OFS) x9ye 6881 Yo. deme enene 


.0c* Baa east rox 12, 98 .2oe OBE! at 


Se =, err. a. a = ate 


Ry = p P 
yelie ¢pléaofia setett Betinv edd Se 


“lt bofyeq Jjaid. oz eueel 7 


ie] 


34 gr’ : 20 fue aff va « 


s = 


=—_—_ 


—=— ‘ aS 
a €6.¢ .-2% OJ Sesoetagt Sag 


.cry, of 4, Sis Sb isda fz ‘clectiee gay 
i 250 [ Last ‘ ent : . oe. B22 ang, , si 

_ 

to fae oft te eee 

ee > 
reek SUCe OW Slt Sia 
oY _ 

.2£.007 288s 
i ig rf ost- to dénael Tagore 


7 
-. on? eolin OSd, 73). Sittegae 
| 2 et Dep ,Cc6T sea 


’ 
- © 
es 


Te EMSs Lsrow Vwayeo off es R 5 
, . ; y a 2 
t By i af anied ,aelin Oss, tof ena : 


‘nid teve teoy ei? 16 eapetoms 


lo gt eabam «ey B12, QtS .Oady . ¥ 


Oa G ‘D ¥ ¢ 1 PRY Ve tte ine Sdeb bet Tt - 


, 
?r- 


w abeor ef¢ Ite te olla te 


es 


ft , Ob ; Bbaorl st 


ic aT Zhe 


eee 
. ' 


The table shows the length of lines owned, 


48 


share capital 


funded and other debts, and the average cost per mile from 1871- 


12 


1890. 


Year| Length 


owned. 
Miles 


18714 
1872 
1873 
1874 
1875 
1876 
te7'7 
1878 
1879 
1880 
1881 
1882 
1883 
1884 
1885 
1886 
1887 
1888 
1889 
1890 


51,445 
57, 323 
70,361 
72,623 
74,096 
76,605 
79, 208 
80, 832 
84,393 
92,147 
108,593 
114,461 
420,952 
P25, tae 
127, 729 
133, 606 
147,999 
154,276 
160,544 
163,420 


12. Poor's 


‘of lines 


Capital 
stock. 


$ 
2,664, 627, 645 
1,647,844,113 
1,947, 688, 584 
1,990, 997, 486 
2,198, 601, 281 
2,248, 358, 375 
2,313,278, 598 
2,292, 257,877 
2,395, 647, 293 
2,708, 673, 875 
3,477,375,4179 
8,511, 035, 824 
3,708, 060, 583 
3,762, 616, 686 
3,817,697, 832 
3,999, 508, 508 
4,191,562, 029 
4,438,411, 342 
4,495,099, 318 


4,640, 239,578 


: : 


Funded debt. 


as 


b 


2,230, noha 
2,459 a ae 


2, Bigieaetes. | 
2,530,874, 943 | 


2,878,423, 606 
3,235,543, 323 


3,500,879, 914 | 


3,669,115, 772 


3,765,727, 066 | 


Manual of- Railroads, 


1889, 


1894, 


ee 


igi to, o Ls, vA 


tea: 
156, 881, 
162, 489, 
222,766, 
270,170, 
268, 925, 
| 244, 665, 
259, 108, 
280, 673, 
6 | 294,682,071 
| 306, 952, 


13. No data can be obtained for the item on 


from 1871-1875.° 


Average 


| cost per 
| mile. 


55, 092, 


use 


237,604,774 


357,477, 


276, 


pd. 4-5, 


284, 


556 
052 


939 | 


267 
962 
285 
596 


284 | 


814 


589 | 


160 


494,297 


53, 558 
59,045 
56,048 
57,730 
58,949 
Ey Pare) 
61,842 
61, 800 
61, 400 
62,584 
61,099 
58, 603 
60,782 
60, 3809 
61,942 


"other dept” 


beginning 


—_— eo 


_ % 
SSS Se re 7 
! iycel.aAz 
; de Atey 3 
t 


i ¢ 
@rr.! .CS8 sae 
. 112, cI tr $03 Tae } 
; bas 280, TRRy ; 
| aa: sae oa 
Ss IS, £95.29 eae 
. "e228 SR tae 
| 529 616 ie 
{ Veo Sa ee it 
: Vee, ees 
| Rte ave gee 
20h ave Tee 
: 54,280 tite 
s : 6G Ue OW od 
a 18, te, sate o 
ae ne. TE Vie ; 
9 2 ) BOF 206, ¢00 mim 
; ‘Ros, t0b Be 
/ - nOe, FES’ BS 
f ry, aS6.¢° 1 BES. 806 306 
" BOL 2 | Bsa ge Oba e 
4 
A . 1 
: . y 
. * La, é Li ee wR), dae i 
oo a level - feel abeork tal to ‘Lesaa 
inwigoc “tceh tadé0" wo met) edd set Bemtagdo on ane 
: é : _ rt 
= roe oe x 


49 


(C) Return to Capital 

The earnings of the railroads of the state of Massachu- 
setts in 1867, were $12,927 per mile, those of New York $15,000 
per mile and those of Pennsylvania, $12,660 per mile. ‘he earn- 
ings of the leading railroads in the West were edt tnaved at $10,006 
to $16,000 per mile, The Pittsburg, Fort Wayne and Chicago earned 
at the close of the fiscal year, $15,464 ver mile; the Chicago, 
Burlington and Quincy, $15,218; the Cleveland, Painesville and 
Ashtabula, $19,247; the Michigan Central, %15,000 and the Chicago 
and Alton, $14,000. It was, therefore safe to estimate the earn- 
ings of the railroads of the Eastern, Middle, Western and Pacific 
States at $10,000 per mile, which, for the 29,146 miles in opera- 
tion, would give a total of $291,460,000. The earnings of the 
railroads in the Southern States were estimated at 45,000 per mile 
for 10,000 miles of road, or a total of $50,000,000. The aggregate 
earning for the whole country, consequently, would be about $340, 
000,000, 

The ratio of gross earnings to cost for the whole coun- 
try was equal to about 21 per cent; for the northern states, 23 
per cent. The cost of the railroads of Massachusetts was $64,983, 
771. Their earnings were $18,279,102, a sum equalling 28.13 per 
cent of their cost. The earnings of the railroads of New York wer¢ 
$50,000,000 upon a cost of $170,000,000 or 29 per cent. Those of 


the Pennsylvania railroads were $52,000,000, on a cost of $222,°00 


000 or 23.7 per cent. 


af) 3 a) 
"8 [3 iT 
i 
sal 5 
ad } 
7r? 
e a 
=ft17O0 Lo 
: 
7) 
io sc 
yw roi % 
* 
i = 


di bun 000,209 ,fexgaed negtdoet arcs 


nt ,000,%1,08% Yo fajot # qo uheen Se 


iw etd £02 Jn09 oF eRntowse aoe Se af 


fLatiqs® 

eiess ott to sBeottie: oft Yo eed eeee 
aol Yo esott elle sec Yoo. ork ene 
-siln “eq 906,87¢ ,sinevivanned 746 
ibis otow JaoW ody at abeotiiag 


tr  ongel gx08 ,eeutade ts off 
3 jolts oq $36,808  reey Leonkt® 


[ivnented ,baslevell eft <BRS. ore) am 

fi.tae Of else orotered? .5e0 4T .0 
,:OLBDI-N -wieteml ef? to 
soitm Sf,@8 eft col .lotdw \siie wee 
itntse ei? 009,008, 6e8 SaRtaaet 
28 do betantone enee cotvalt ovetduae s 


WOW ULC pesnoo: , Yilitwos ‘elodw 


"TOM OF. SO} poneo seq Is Suods of J 
" sitencdcesas To ebeotl tet enh Fo oes: 
iLevpe suo # .SOM OTS S18 eter sandr 


i) abaotliage ean? “ho Bantires est ,¢adm. 


-/185 “eq Qf to 900,000,07"78 To sabe & 
P0> #2 16 ,00,900;S28 eter ebeowt hag. 
- a tee 


A a mw yn 


bese » , seen = | so eo 


50 


the earnings of the railroads of the eastern states, in 
1871, including New England, New York, New Jersy, rennsylvania, 
Delaware and Maryland, covering a mileage of 17,278 miles, were 
$11,500 to the mile, or an aggregate of $197,697,000; of the west- 
ern states, having a mileage of 28,388 miles, $6,500 to the mile, 
or an aggregate of 4184,522,000; cf the southern states, having 4 
mileage of 15,421 miles, $4,500 to the mile or an aggregate of £60, 
394,500; of the states on the Pacific slope, having a mileage of 
1,765 miles, $7,000 to the mile, or an aggregate of $12,355,000. 
The total earnings for the whole country were $454,969,00U; the 
earnings, ver mile, for the whole were $7,500. Of the earnings, 
about two thirds were received for transportation of freight and 
one third for the transportation of ee 

The earnings of the railroads in the United States in 
actual operation in 1861 were %$130,000,000; and in 1871, $454,969, 
000. The total increase from 1861 to 1871 was about $320,000,000, 
or $32,000,000 annually. 

In 1880 the total capital investment of the railroads of 
the United States, measured by the amounts of their share capital, 
funded and unfunded debts, was $5,108,241,906. Their gross earn- 
ings in that year equalled $615,401,931, or 12.4 per cent on capi- 


tal investment, while net earnings amounted to $255, 193,437, being 


4.9 per cent on capital invested. 


14. Poor's Manual of Railroads, 1872-1873, p.28. 


y 


mf ,setsic atetess edd Yo abnoiliat off 36 gankawees 


4 


Oe 


_ainavizenne: ,.Yaxces well uct get shoa lua weil, 


VCR .COl aoe os Sedacome auniongs don olin ce 


eter ,colig OVe,Fi to opsealia » anlneves . Be 
efeer exit , 205, To, fete te JABS Tess We Wo Oe 
elim ot of DOT.34 , 06S ie CRELER To ogeo lhe , 
& satys .covats miadigves off $e; 00>, sS2, heh 
OSE to aingeitane ne 10 efite saree cog, +f t 
To paxellzc 6 acived ,ecels of fiaet eff ne é 
OO, AE .S5R to of ABS TNBE Re TO, 0 ieMe or” 
ny, 1? Bo0,aFn ‘ete Vis elodw aie igly 
5HShitws of! 3 .002,7? saow efone ene 
be fas? %o i dates '10T Dov saves @ 
‘aaa [0 wold edworertaay 
af foo Delle edd ot eGeatal tem aff Dow 
,Ot ecre 1%: it bose 7005 ,000,oF le o1st £aAt, 
722,999, OSC duods sow (TB oF (26) wee | 
; atl 
eorzien « [Oo ten teeoval Ladtbeeo Bagod, meee 
; elaie wens To ataueya edt betitnpeg 
4@ aeot tLe? 008, '46,86t 28 eae -asded 
“id9 80 Jneo tog &2t so (020,00, 008 Sete <4 


ed 


.betoovnt Latiqas al 


Soe ,CTeSTAl eheowt 


51 


In 1885 the total capital investment of the railroads of 
the United States measured by the amounts of their share capital, 
funded and unfunded debts, was $7,852,535,1/9. Their gross earn- 
ings in that year equalled $772,568,833 or 9.9 per cent on capital 
invested, while net earnings amounted to $269,493,931 being 3.4 
foe cent on capital invested. In 1890 the totai investment was 
$10,122,635,900, gross earnings were $1,097,847,428, equal to 10.8 
per cent on investment, and net earnings $340,921,318, or 3.4 per 


15 
cent on capital. 


15. Poor's Manual of Railroads, 1891, p.5. 


to abeoxlteit eff lo tnenteoval Lagigas Lado? eat Baeee 
-t2diqeo orene Aled! To atnvome edt Vd betussene 


“rt2o beats tfodT 0:1, 2F2 828-78 age .esdeb 


Easiqes no fnveo tog @.@ te €£6,.808,STTe be atpe seal 
*.€ gniod |S, ¢e+,C38¢ ov Bedawome gantaias) 
any tnenteeval Jot at? OO6F get i aa = Jf 

Of of Lavpa ,P55,. 78, TOO 08 ae eedeee. 


teq #.¢ 10 , FE 1 SQ ones san iatas gon bus, ff 


} isco 


1883 


s 


ated, 


= 


The following statement shows the hength of lines oper- 


gross and net earnings, and interest and dividend paid by all 


16 


the railroad companies of the United States from 1871-1890. 


Length 
of Line 
oper- 
ated 


Year 


Miles 


44614 
°57323 
66237 
69273 
71759 
73508 
741142 
78960 


1874 
1872 
1873 
1874 
1875 
1876 
1877 
1878 


1879 
1880 
1881 
1882 


79009 
82146 
92974 
104971 
110414 
115672 
123320 
125185 
137028 
145387 
152745 
158037 


1884 | 
1885 
1886 ° 
1887 
1888 
1889 


Gross 
traffic 
earnings 


$ 


—}— 


| Net 


L 


tratfiec 
earnings 


Bee 


SE 


Interest 
ipaid 


al ae 


| Dividend! Per- 


paid | cent 


a | 


$ 


403329208 
465241055 
526419935 
520466016 
503065505 
497257959 
472909272 
490103351 
525620577 


613737610 


701780982 
770209899 
829772924 
770684908 
772568833 
829940836 
940150702 
960256270 
1003736596 


1097847428 | 346921318 | 2 


141746404 


| 165754398 


183810562 


189570958 | 
185506438 | 


186452752 


170976697 | 


187575167 
216544999 
255557555 
272406789 
280316 
293367285 
268064496 


269493931 | 
300603564 | 
334989119 | 


301681051 
322284986 


626 | 


93559573 118.85 
98820927 | 20.80 
'403160512 21.04 
/1412237515) 
107866328 
14285873802 | 
154295380 | 
173139064 | 20.85) 
176694302 22.85 
187426035 | 
189036304 | 22. 
203790352) ; 
| 207124288) 24 


17.45 
18.29 


| 


21.14 


24. 20 


| 


| 74294208) 


56456681| 39..80 
64418157| 38.80 
67120709) 36.60 
67042942 35.40 
39.50 
68039668) 36.58 
58556312! 34.38 
53629368) 28.60 
61681478) 28.50 
77115371) 30.20 


20.00102031434 


| 


93844190| 34.20 
(36.40 
102052548) 34.80 
93244835) 34.80 
77672105| 28.80 


29104144| 21.00) 


A ee 
219877150) 1, 88 


| 81654138) 27..20 
| 91573458) 29.40 
26.60 
81264029) 25.25 


Poor's: Manual: of; Railroads, 


Asse; 


1891, pp.4+5 


147. No data can be obtained for "interest" item beginning from 


1871-1875. 


83868632) 24.2 ff 


ywoce joseslete. patwollot eam 


io 
s gasteinl hoa + tpala@ege: tag 


por wott ostaeté bedvind’ #4) Yo guineas 


“—y ‘eotedal POF 
bigs otTiesi 


> Peobetes | 


12 ; 
: ) ~ 


bOLOST IST | BOSERS 
CSOPCYSSE | CGE 

“SCl868L ) SoRg tae 
/CUCVEURL | SUBS ROS 
“lorOkeS) | MOGaagne 
Sr ovaneese | s20egeed, | semtemane 
A re Cc caves . SVS eee 
Ta ceveven | Leswor 
iY S@@aezare | $CRtiam 
stil) 2geuwéeas | 0 bevenae 
| wa TsOsees | epee tem 
y. Weereces | PeeeoRG 
rots) WgVageee ) heaeteS 

Geett, ef .epge¢ | S0ehiagm 
sce. | CGgepees) SAapaaeeEe 
COBOPEL  LocOsOGe | RRO Miaam 
S02  MESCee.ee SOUS rORe : 
vce PEO the rOs . OTseecde A, 
012 | OBORBSSSS | SSRN ROO LE 
. 2b% | GSDVRST OO 


—— ooh 


G=b.ag fest | HEL pe heott let New 
2G tort "ipetesah* aes beqhaste e¢ 


CHAPTER V 


Development of Railways System and its Relation 


to the General Economic Growth of the Country 


One of the characteristic features of the economic growt 


of countries is easy communication and cheap transportation. From 


the very beginning, the prosperity of a nation has been measured 


by the extent to which it has enjoyed the means of travel and in- 


tercourse. In nearly every part of the world economic progress 


has sprung up tirst along the seacoast and has been gradually 


extended to the interior. For lack of cheap transportation and 


the economic progress in the interior has been 


easy communication, 


very slow. 


The coming of the locomotive opened a new era of economif 


Advancement in wealth has been more rapid within the 


prosperity. 


Com- 


last hundred years than in any period of economic history. 


modities can be widely distributed and markets are open to every 


one. Industries become national and commerce international. 


There was never a railroad built in this country, said 


Poor,where the people along its line did not make ten doliars 
1 


out of it, where its owners made one. In the first place, tney 


get their products transported for one dollar, where, before the 


railroad was opened, they paid twenty. ‘they get their products 


inoved by rail as far in one hour as they used to move them by 


horses in twenty-four hours. ‘therefore there can be small econo- 


1881, p.41. 


1. Foor's Manual of Railroads, 


¥ ATTA 


TOLck-e5 BIS hh Gotaye syetiial Yo vacua 


CiAUOI oft Ie sdvtow> oteonos® Lesensivee 


WOTS OLumioos on’ To eetudast sLtusiyto 
wor. .colJet-cogngean! qeeto Seagate 
De Wwe (wed &i roivan # yo tf i teqaoi, ont 
"at Bae levels to anaem end beyotns eae oi Jone 
SeouRC%T olaetions biiow ens BA tiaq yee 
* Leurba (is weed seti Bee fevousen ele OURS: ” a 

at LJSotogenats armed Yo dost yw stad ee 


aeec Hen 19lietul exe af ewstno nq ofpdgepe extt 


Pi 


‘Ones Io ate wen « -heneac avitomooces end 26 
| ‘iwWiw Divert steu deed aad ad taee mi iH 
» Ztote Ls $ one98 To bel-eq tee wf eee 
CaSeve OF meqo ete atetcen bie bedi iebets wlable. 
i 


10 eVietal soxvemcon Bae Denéisese onoved 


4238 .vi'tinwod stne al +i bw Hbeorllar 2 Leeatilenls Be 
ete. fob ood silam von Bés ae ett guots ateueal 
tens ,804la tart? ‘eds. Al sO0 han arenwo sti « 
ed ,eueiw “ello ene 10% bedwecenace a, 
tieds sen youl -\dtews Hlag yeds 100030 
a OL,F- @) 


“1 0! Soeu jent 62 wor ene ae tek ba 
“OOD 


oe iLame oc ‘tee erend oto tegeddt? .ewort 


feud .t8er ‘ “ 


54 


mic progress in any district without good roads, a phrase which, at 
this day, means railways. The mining, manufacturing, and mechanica 
developments, which form the vital essence of modern life, could no 
exist in the absence of the iron rails of the present day. 

The railroads of this country have an importance in the 
economic development of its people possessed by those of no other 
nation, They are, in fact, the markets to every portion of it. Wheat, 
which will bear transportation 2,500 miles over railroads, will not | 
bear transportation for more than one-tenth that distance over ordi: 
nary highways. Wherever railroads are constructed, they give immedi 
ately a high commercial vaiue to the products of labor. The value | 
and the influence they so generaliy exert is well illustrated by the 
following a meets es 

In 1860, there were 30.626 miles of railroad in the United | 
States. At $4,000 per mile of line, their earnings were 8153,175,0dp 
or $4.90 per head. In 1870, there were 50,000 miles in operation, : 
the earnings of which, at $9,000 per mile, were $450, 000,000 or 
$11.75 per head. In 1880, there were 93,000 miles in operation, the 
earnings of which, at 6,600 per mile, equalled $613,800,000 or 312.40 
per head. In 1890, there were 163,000 miles in operation, the earn4 
ings of which, at §6,500 per mile, equalled $1,059,50U,000 or #45.79 
per head. Such an increase of earnings measures accurately the in- 
crease of the wealth and commerce of the country due to development | 


of the railroad systems. In other words, without them the commerce 4 


2, Poor's Manual of Railroads, 1870-71, p.35; 1300-81, p.59. 


~ 
o 


2 $4 


ier 


iiet to sella 386,08 exew gaeme 


p stor , Lip c0g 200,08 te wotdw ® 


Gl APZaq , PTAOTEE cabee 


.F5201 hoog fuodiiw JolvelS sie me 
men ,Baolate ed? ..sraw lines 


pak at a re I= Oe i Bw py oJ zi jot toldw 


aT oe —<{ % 


ai? to bilat now ett foe 


oven Tidauos sidt to hae 
ocaeateq @igqeeq ert. Io . 
ety 
ovo Of alee ea? ,Joat af 


hs 4 
‘Oo aolima O08,\S aobésccves 


> — 
15 J ~eckc Seon «62 2 


Teno te asneoxrtlineg Ge 


[o> 2 ab’ balan d, aad ” Dey < 
np 
fon 3 Suexe (i leveng_ OB Vaden 


aX 
~ Sa 


e 


imtes foul ent! to ellis 19q 


,2c ete ota ores ot Dae 
23,7? scuw secs OMB! al ok 
a ©, 
uot 


e fi 


‘COf 6"0m e#te9g2 0G6 


a = . te 7 
''© bellacps ,e ite 1oq Sr | ta” 
; SJ 


leups ,olin geq 900,00 sae 


ay 


SO Ig im encdisepe To se@se<aal aT 


Cilnvod a? 36 sotemses bite tid Leow: 


~ 
Jvotijly alton sesizo al » 8iegoyn £ 


* 


dma . 


wealth of the country could have had no existence. 

Due to the development of railroad systems in this coun- 
try, various forms of western agriculture were practically revolu- 
tionized. It became possible to cultivate with profit a large 
amount of wild and tenantless land that could not before be utili- 
zed. 

The most remarkable gains were on the Pacific Coast, and 
the western, northwestern, and southwestern states. Various causes 
helped to create this wonderful increase of wealth, and in some 
localities it was only due in a slight degree to railway constru- 
ction. But in many other sections the new railways were leading 
causes of the great advance, 

A positive advantage which all departments of agriculture 
have derived from the development of railway systems lies in the 
giving to the farmer the benefit of the best markets and the high- 
est prices. We have already shown that this increased production, 
or ratner its surplus, could not nave been carried to market with- 
out the aid of railroads, more than two-thirds oi the whole being 
carried off by that means. Let us now reverse this statement. We 
find, on the other hand, that railroads have stimulated and in- 
creased production. 

The influence of railroads on agriculture is most obvious 
in the western and northwestern states. The following table, taken 
from the United States census, shows the rapidity with which the 


3 
farming interest has been progressing: 


3. Ringwalt, Development of Transportation System in the United 
tates, p.261. 


Total land in farms, acres 
Improved land, acres 

Total number farms 

Farms under 100 acres 

One hundred to 500 acres 


1870 


407,755,041 
188,921,999 
2,059,985 
2,075,538 
565,054 


1880 


536,091,835 
284,771,042 
4,008,907 
2,208,374 
1,695,983 


Five hundred to 1000 acres 


155873 
One thousand acres and over 


3,720 


Comparison of the product of some leading staples shows the 


eso Ce 
28 ,578 


following: 1870 1880 
Wheat 

Corn 

Hay, tons 
Tobacco, pounds 
Butter, pounds 
Cheese, pounds 


287,745,626 459,483,137 
760,944,549 1,754,591,676 
27,316,048 D5 205i le 
262,735,341 472,061, 157 
514,092,683 777,250, 287 
27,772,489 535,492,155 
If the effect on the western and northwestern states has been cor- 
rectly stated, it is true also of those states which are not 
included here. 

There is another respect in which the influence of the 
development of railroad systems is favorable to agriculture. ‘the 
influence on the value of farming lands is too striking not to have 
been noticed by ali observant persons. We have, moreover, some 
remarkable instances of the specific effect of certain railroads. 
We have, for example, the immediate effect produced on the lands of 
Illinois by the Iliinois Central Railroad. That company received 
from the government a large amount of land at the time when the 


government could not seli it at a dollar and aquarter per acre, 


Since then the company has constructed its road and sold a ae 


part of those lands at an average of eleven dollars per acre. Not- 


4. Ringwalt, Development of Transportation System in the United 
States, p.185. 


ra. or AO 27. TOS Beck ,omrs? ae 
. Sh eee, Se. S86! BA TOR 5 
: y,.> 76 .c2c,s eorret 
¢ 80s. Fe.279.8 SGeI9s OOF 
i. 208, 649 Foe setos O02 off 
Bt ETS 28 setsa O90f 
>. F 7 ,f wevo fra t 


—ss + 


“ 1 29 fasse acihbesl @poa to Ja 


ove? . ai 
ron, a % 
FOE .o2T, | Obs, he OST 4 shal 
: t 63,52 TS = 
_ €,ctT Soe oa) 
e ss ©. ser Te ~— e 
= W & ™ a a 7 
’ t q ® 


~ 
+ 


‘3 eon sevsece otevnevdiren basa Aredeee 


ae 


‘lt S@7a78@ seors Yo gaia ous af 


j if est nolAaw ot jooquers to Jone 

-Oilv olige of eidnzovel st emedete beorts 
Alte ood ot sboel yotesat To eblay a 
‘Tsvostog ,eved af . ,anesiec tonviesde Lie 


I&iI a bu’te@o 30 foe tte oli toeds sng to £2000 
7 


io Deoubour Soslle e¢ztbemme oxriz else 


eqaou Jant ,SeoRiish Leasadd. sfomierr : oe 


abe s: ‘ biel to taueme ental 2 


= 


ae | eq te?tavpe Bae taffob o oe se ifles fom Sis 


‘a 


6 one Leot etl bedgourgrendo ned Yiaeqmos 


Ton Seq anelfoh covele Yo ezeteva asta ehasl i 


withstanding the rapid growth of population, the large part of this 


advance is due to railroads. 


If the effect of the railroad system has been so great on 


the western states, it is still greater in those states which lie 


beyond the Mississipvi., They are still further from market, and 


will be enriched in a large ratio by the facilities of transpor- 


tation. Indeed, railroads are the only means by which the distant 


parts of this country could have been commercially united, and thus 


the railroad has become a mighty means of wealth, unity, and 


stability. 


For the creation of what is known as the factory systen, 


with its teeming industrial populations aggregated into busy urban 


centers, the railways are certainly far more responsible than the 


earlier modes of transport. Suffice it to say that as soon the 


railways had allowed great quantities of raw material to be con- 


veyed, at especially low rates, to particular districts; machinery 


to be set up, also at lower cost than before; labor from the rural 


districts to be brought in and concentrated in the same localities, 


and the making of an efficient and less costly distribution of 


commodities produced on a large scale under the economical condi- 


tions--it was inevitable that factories should supplant home in- 


dustries, that manufacturers should succeed small masters, and that 


great towns should grow up in proportion as rural centers declined 


The towns and the industrial centers expanded farther 


as rail transport afforded increased facilities for the conveyance 


of raw materials to works which could be set up in any part of the 


4 


= ee AS GIT — a ee a 
¢ 
7 


- 


ee 
: 
4 


ee 
‘ 


‘ 
$ 
‘ 
} SniItE 
Bb < 
H 
oi Ms 


Ye 


e 62 Sah S808 Shitl 8 to Deonbomem 
i 
- 


we Sivonen seltoteat dedt elidasivent 


ont ,ioltelvqeg to divous bicex. eff 
»sbeotllet oF 

| 

rectiieat en? Ic faeTie ont %2 

ci t6¢e07=2 [lita af os cor 7a 
conitiat Fete ts yodT .leqbass 
wd often ae 

of! ¥.n6 em ote abeov lian 


3 aeed eval Sieos vegas 


iv leew lo onaec vihdhie & enooedl 


if Jor to Holteene oe 


te eholivelygod feleteubeal o 
a” es 


bet Stod l Yictetcoo ote syee Eien 
eof’ oad ‘ “ aa 
; ‘TsO Socata Be Br 


Wet so ads itasup saony bowolle Bas 
: 9 
salvo! ftag | ssevart wol Tilers Tae 


(oro? it fe0o tewol ge os is 


7 


ewien0d bee gl tdssend é¢ 


- 


i hte Joolol?te me to aa 


bescove Alitote esetetoetunan da 

oli 88 nelimoqeng Al ag woay blvode 4 
1 
E oJrleS Ieigcevint ets bee sawed ont 


; 7 % 
esitifiocl Rezzedsat bebiotta 


~* 


r 
9 G ' 
aa y 


58 


country, regardless of the once indispensable water power; and the 
procuring of these raw materials not only greatly expanded nationa 
wealth but led to the opening up to industrial activity of many a 
district previously isolated and undeveloped, 

All things considered, railroads are the cheapest workers 
of the country, and if the theory favored by all influential schoo 
of political economists that transportation is one of the most 
important elements of production, is correct, they are, substan- 
tially, leading producers of all classes of bulky mining, manu- 


facturing and agricultural staples. 


, ae 


:toroy “elew eldasviegethal sone ed? 26 nae 


bebracxe Ulvaean pice fan eleltesam fan seemd 


an amt. 2: 


e 


® isttierhet os qu gilaeqo emg 
»beqoLeveban fra, boretoal 
# ebaorl ion hereblenog ay 
vc Levowalt Gtcets ent te 
if lo eae sl molteteoqemee? gadd 2d 
ete yous ,soeTx6o @h \mOkeomBotd 
Dé ix Sli To sesents Lis te 


,eelonss Le-eotiwot 


CHAPTER VI 


Railroad Rates 


(A) Movement of Rates 
In order to trace the movement of rates through a 


series of years, it was necessary to do something more than merely 


compile a mass of figures. Differences in the nature of the traffig, 
and in the conditions under which it is moved, make averages unre- 
liable. Yet changes in average rates indicate to some extent the 
movement of actual rates. Examining together the movement of aver- 
age rates, and of some particular rates, we may approximate the 
general course taken by actual changes. 

During the quarter of a century following the close of 
the Civil War there was a marked downward movement in freight rates 
in this country. The decline of freight rates was far more than 
passenger ee Now let us treat all the railroads in the United 


States as one system,. Freight rates on the average per ton per 


mile were, in 1867, 1.92 cents; in 1870, 1.88 cents; in 1880, 1.23 
i) 


cents and in 1890, 0.94 cents. These figures show that the average 
freight rate in this country in the period from 1867 to 1890 
Geclined fifty per cent. Traffic in this period, has not remained 
of the same nature, so the accuracy of the conclusion drawn from 


these figures is also weakened. The average earnings per ton per 


1, Ripley, W. Z.. Railroad Rates and Regulation, p.429. 
2. Noyes, W. C., American Railroad Rates, p.161. 


IY ATIARS 


seta Hheotrlial 


e7 ‘lo Sremevom eg o+ens 


td dl 


' ot \icseuoe Of GF tashetet amie 
utes ocd cf sepmeteW?hd, . satel 


1: 
sieve oem ,wevon al £) golae geheo aaa 
: er | 


> 
- 


aJeorhal setet speveve me 


ot 


—) 
iG Snenmeyorn ont werltesod antalee cobne . 


etems ‘lu Ye ow .pevet teLuoliaeg eieee 
senasno Lavdoas vw ‘ 
f (tvinss £ 26 telteys sags 


cuovon oternwoab fhesatag 2 eam 
w covet Jmtlevt to eatioeh eat 2 
ri obeorllor ett (la deet ae Jol wee 
S36 19vh sol pe sasarx tenlorT o ol 4 


is 


i 
. OB if jsdneo &.' ,O7et af sadnes eeriF  Ta8t 
c a 


‘ie woe sexuptt eset? ,sdaso $8,008 Lie 
+e 
r66t mott bofreq edt alt yateies Sine mae 


fil ,bolveq elng mi offierD ines see t 
noleuloros edgy Io Youeuwo0e bay e687 


ioipe sxeveve Sat  benetsew oefa at rt 


- 


. 7 ‘sq , 70 J ff 


mile are manifestly determined by the nature of the traffic as well 
as by the rate charged. Changes in receipts may result from chan- 
ges in tariffs. Receipts per ton per mile may, of course, decline 
when rates decline. But they may decline likewise if rates remain 
unchanged. However, from our examination we noticed that there was 


a most marked decline in freight rates in this country from 1867 to 


1890. The decline is graphically shown by a diagram on page 62, 


Let us now see what results can be obtained by noting 
the movement of actual charges. New York and Chicago are the most 
important commercial centers in this country. The rates between 
these cities are not only of importance in themselves, but they 
form the basis for rates upon traffic moving between other points 
and in other directions. First let us notice the movement of rates 


upon classified traffic for a period of more than twenty years. 


o studgon et of benlenedeh pioas 
vou adqteoer At wpezaamd (bene 
eh ,ostwes To , Yat elle seq and see etetese 
selweitt emtieed yes yeitt #8 
18 ic heotlon ef aOLdenimae nn aot 
bent y<Ique°O eld? et nodidiiasbans. al 
exey 20 sexpelh a yd cee Uleoriqeng 
f_bentetdo e¢ mee otfipees doede 209 
if onfoi00 Aote a4oY well .gemeiain 
ejJor ei! .yidawoo siggy at easton 
,covieesieds of eonadaogas 26 vino 
to deewsed antyon olTtaw gogH eotot 


_ 


sHhenevon en? eoldont ay Fal setrl + 


- 


a9¥ Vtoows meng otom lo bebaed 8 Get) as 


Rates on Classified Traffic from New York to Chicago 


3 
from 1865-1888. 


Classes 
(Rates in cents per 100 pounds.) 


1865-Oct. 
1866-Mar. 
1867-Nov, 
1868-Sept. 
-Dec. 
1869-Aug. 
-Nov. 
1870-July 
-Dec. 
187 1-June 
-Dec. 
1872-Aug. 
-Oct. 
1873-Apr. 
1 874-Jan 2 
1876-Jan, 
-July 
1877-Mar, 
1878-Feb, 
1879-Aug. 
1881-Nov, 
1882-Jan 


NOV. 
1883-June 
1885-June 

-Nov. 
1887-Apr. 
1888-Jan, 

-Nov. 


a. his table is abridged from Keports of Interstate Commerce 


Commission for 1902, Appendix-, Frart 2. 


4 r vee 5 


a 7 


e 
aot. 


ry 


JStietsial to adyorsH monk bendluda el 6 


rs 
= “a 
> 
| 


olbieasxT? bel tiseeld as 


a 


Ye 


» 7 os 
-S ¢1et ,-xitaeqqé soeh hee meee 
Sst i 
Re 
: | 
} a 
i j - 4 — 
a s 2 
oo. 


» SOG Hee Otay 


7 - tr ‘ - res be dene ar - 4 
' o » 2 ° 4 . F: 
7 $ see t ‘ bbe ‘ ; 
oe : com 8) aiseit ss, : ; oi ae :- eat Dok 
; ’ 20 foe > arti , rca aie ll Taree 
. 4 EES ; . 4 : nee 
: i ~ ‘ ad t : + : —_~-- 
j e — p aes ay, ~ 7 F st; 
a 4 4 : , t t 7 ; r t. A) ; 7 — 
« » a ¥] . 7 
‘ “—°> = ‘ i 
. - . ne ee —e - ” be - : 
| : rie) epee oa : 
: mad Bone ep 
= f : 


63 


This table is of interest not only as showing the course 


of rates, but also indicating the effect of rate wars and periods 
of depression. We can see clearly that it was due to lake com- 
petition, that rates in the summer months were, as a rule, lower 


than in the winter months. However this table is also somewhat 
unreliable as a comparison sheet because of changes in classifi- 
cation. Frerhaps we shali obtain better results by comparing rates 
between the same points upon several important commodities. 

Rates on different commodities from New York to Chicago, 


4 
1867-1890. 


Commodities (Rates in cents per 100 pounds.) 
Nails Beer 


Date Dry Goods ‘tea C.L. Ey, Cady, €.l.2 
1867-Nov. 2 202 
1868-Aug. 
», Oct: 
1869-Feb. 


1870-dJuly 
187 1-Sept 

Dec. 
1872-Aug. 
1873-Apr. 

Aug. 
1874-Jan. 
1875-dan. 
1876-dJan. 

July 
1877-Oct. 
1878-Feb. 
18381-Aug. ‘ 
1882-dan. 
Nov. 
1883-dJune 
1885-Jan, 

Nov. 
1886-Aug. 
1887-Apr. 
1888-dJan. 

Nov. 

Dec. 


4. This table is abridged from Reports of lnterstate Commerce 
Commission for 1902, Appendix G. Part 2. 


oo vin om Jaetetal to af sited” 


sie : Joa iio ha ie wtteotbal oats 

- rw tt gate ¢ftwelo 602. aonb ee 
,.@few enone shee ans ns secant 

ly , 


_* 


dod afst severot -, alvaeis 
. wi 
elvatwieo «4 
ee a 
kat : (ot ited Ratco .iae aa 
, - * abo 

; . ct o0M_ Levees moqw etabogs 


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‘ ; 


cee 1 Slr lpogoo Snetstes . 


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- ¢ es 
* uf Po 
iF . 
C me | 


Sia 
pairs 
Be Ka 


4 


Cf oy «4 
.¥ 

2 | 
— 


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rn > 
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3 — 
f . 4 
at at: 
’ dor . 
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i O7 le 
‘ ot ah 
7é cy 
, af st 
c me 
, Raden eT : 
; ec ey 
Se) 
M4 _* .&t ce 


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et 
@ 4 
at 
¥ 


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ateiineeiae 

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»S. tet 5%) been 7 oy 


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a ee. -—~s — ie a aoe 


Rates from New York, N.Y. to Chicago, 113, 


(In cents per 100 pounds.) 


lie Gy «be Cc. L, 
Class Rate Class Rate 
Commodities 1886 1890 1886 18900 
O 4 ) 6 
Acids, in iron drums, 0O.R. 3 4 45 4 oa ae Oo. 
Boots and shoeg 1 1 75 75 1 1 75 75 
pee cotton, grain, or 
salt, in bales 2 2 60 
Canned fish, fruits, and — ; 4 2 
vegetables 4 4 
Coffee, in sacks 4 4 ae a 4 7 22 35 
Drugs and medicines 1 1 %> YS 1 1 Ts (Gs) 
Glass, window, 80 united 
in. and under 4 4 35 35 4 0 
Groceries, N.O.S. 2 2 60 65 P) : ee 25 
Hardware, N.O.S. 2 3 60 56 2 3 66° ~50 
Leather 2 5 60 50 2 4 60 65 
Macnines, sewing, K.D. 2 2 60 65 2 4 60 35 
faint, in oil in barrels 4 S$. 35. 35 4 5 55° 30 
Paper, newspaper, in:rolls 2 3 60 50 4 5 35 30 
Soap, common 4 4 35 35 4 5 95 32 
Carpeting, N.O.S., O.R.C. 1 Nien NBA. 75 1 2S Vat 
Blankets, N.O.S., in 
pates, ©, R, Cc, 1 1 C52 75 1 1 
Brass, wire, nails, bolts, Cae x 
screws, and rivets 2 2 »66 . 65 2 4. | 60 ~-35 
Chairs, K.D, 1 2 U5 65 1 o (gs, 355 


These tables show a decline in rates fully equal to that indicat- 


éd by the movement of ton-mile receipts. Like the preceding one, 


these tables include only competitive rates. 


5. Reports of Interstate Commerce Commission, 1890, P206. This 


table only shows the movement ot rates for a short period, 
but it indicates a general reduction of rates on such com- 
modities as cotton, salt, glass etc. 


asic @rtt -eeoleos: si lm-nes Yo 


AO! co tes Jee, pormegmed es 
CR <o1 Bedse 2 fren ¥ 
J ee pu saasGukun L 


a a \ oy we’ a eetah 
; ' i099 G2) 
awk, Oca 
93 a7 agaely 
Qo! OSE! GeBr abet 
Re ~ = M 


i ee a! 


4 roa 
ey 
&é ; + 
bo ce ¢ 
f ¢ 
: § 
i a : 
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7 
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Pe ; c 
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icups Vite? eeleg ak eal fos «4 


-4908Y evil lveqsosd Yano ebul 


ote aogta trae \aodsen ne $ 


oT Cee, ra = 


Here are tables showing the movement of local freight rates 
upon an eastern and a western railroad. 


Local Freight Rates upon Pennsylvania Railroad, 1876-1890. 
Stations from Classes(Rates in cents rer 100 pounds). 
New xtork to tear 6 
Trenton, N.J. 1876 
1886 
1887 


1890 
Harrisburg, Pa.1876 


1886 
1387 
1890 
Pittsburgh, Fa.t876 
1886 
13887 
1890 
Erie, Ya., 1876 
1886 . 
1887 21 18 15 
13890 on - ON 18 15 


Local Freight Rates upon Chicago, Milwaukee and 5t. Paul 
6 


Railroad, 1883-1890. 


Distance Stations from Classes (Rates in per 100 pounds. 

Miles Chicago to 

D & 

228 Marion, la., 35 28 20 " 
25 13 
22 12 


Melborne, la. ¢ 35 20 
26"2 f 15 
25 14 


Council 
Bluffs, la. 


i i before 
6. The first table was Joint Merchandise Classification 
1887; Official Classification after 1887. The second table was 
governed by "Western Classification". 


lott Lee io dntemevonm ocd priwote 6efda? eae 


-lecoalies oteteow 2 Bon 


MEl-o\8) ,Seotilel alnaviyonast aoqw epcal 
-(25nvoq 9Ol ced e0n00 41 weds besaeeto 


c 


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t 


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Ae be 


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i - 
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Saris 
re om 


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Olan \esapeald 


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ote ton fJeciliessl® sethwedongt getot 

Sidey oto%9s eff S66 tadhe no hee’ sane 
ne MOLPBOL DL wate £5 


‘ 


° 


hy 


Pee CRAMER 


1 . : 
f — 
7 : : 
i ie > ‘ 
; " 
e 7 \ 
_ q . 


ae | 


aS 
. 7 


These two tables indicate that local rates have declined 
less rapidly than competitive cnarges, and tnat decline in local 
rates nave been more remarkable in tne western tnan in the east- 
ern states. 

Now we can see that upon the basis of ton-mile receipts 
average rates declined fifty per cent from 1867 to 1890; that the 
particular competitive rates examined have declined to an equal 
extent; and that local rates have decreased to a limited extent. 
Without going furtner into details, we may draw a conclusion that 
rates on an average in 1890 were less than half what they were 
more than twenty years pefore. 

(B) Development oi Rate-making 

When railroads were first projected in the United States, 
there was no definite basis upon which to establish their tariffs. 
Cost of maintenance and operation were oi uncertain estimate and 
the economic relations oi the transportation function were simple. 
Some of the state legisiatures, at the time of granting charters, 
assumed that a railroad could furnish transportation at a lesser 
price than the wagons along the turnpike and, therefore, arbitr- 
arily decided that the freight charge should be a greater or less 
proportion of that customary by wagon. In some parts of the 
country the wagon toll was 20 cents per cubic foot for articles 


light in weight, and $1 ver 100 pounds for articles heavy in 


weight, per 100 miles. The charter granted by South Carolina, in 


1827, to the South Carolina Railroad, serves as a good example. 


The provisions as to the rates in the charter were that the frei- 


ey by Ty re eA Po ' fe 
ita 
: t eid eteolinal enidad comes , 
G é 
$ ;249gteno oVidiveqnod, Gaga 
s Pi, 
: drkteset @3om cee 


220 erg gory Janz eeae te 


' Crain a8 

ti xed geq- urtet Seale 

sviul hea tmnete aovet sviseoe 

| pine | served sav evar Cao | 

e v, PrP ¥ynro ew ,alle@éb-ovel edi 

| er tie a seel etew O88? mt wigs 
stolen ney 

orrty an-oev al 10 | 

;: Bsc | 1! bedcet ond serlk® eter 


pattie Lidetoe og moldy aoc alee eaten 


4 
‘Le, 


nisi‘ecav Io exoWw SolgpgeGd Bae ez 


SOd 
~ efyn: 191 cut nolgedvocaunesd pad 6 anorg afeao 


ry 


AK 


,ate tt t "* 5 #2l/0 on) Ts ,Retiaeleatpel of 


q ~ 
e 
‘ 


| froqenenw etna: Bioes boowltet Bd 
; =tWitdas -ext | ioe eliqwent ect gaote 'nemme ae 
i 2 Tetue tw +s bites optus ‘taigtont ould todd 
4 t to « elo ah ,@énee ed cu otene sais 
j  sefolite tor t Jittuo teq edness OS mew Lod 08 . 
A ra slotove “ot efngoy OOF see 1@ fae at a: 
| eOiticnad aw vd bedasuy od tate of 2oLin og 
-2iqhexe DOdm & be settes sol led antes 
Let? oft tent onan sedvteto emf at sedan out 
ia re; 


ght charge should not exceed 10 cents per cubic foot for articles 
light in weight, and 50 cents per 100 pounds for articles heavy 


in weight, per 100 miles; this arbitrarily making the railway tolls 


¢ 
one-half the wagon tolls. 


The practice of the wagoners to charge by the cubic 
foot for articles light in weight and by the 100 pounds for arti- 
cles heavy in weight was followed by the railroads; but it quickly 
developed that it was not easy to assign certain articles to one 
or another of these broad classes. This difficulty was increased 
by the fact that the railroads brought about an increase not only 
in the volume but in the diversity of commodities offered for 
transportation; things differed, not only in bulk and weight, but 
in value, and the way in which they were packed. A more elaborate 
grouping was obviously necessary. The initial steps of this 
development, as it pertains to the railroads of the United States, 
are lost to record, but much progress was made within thirty years 
is manifest from a document issued by the South Carolina Railroad 
in 1855, copies of which are extant. At the top, four classes of 
articles are specified, the first including "hats, bonnets, saddles 
furnitures, plano, tea, and other light articles," for which the 
charge was made per cubic foot, ranging from 4 cents for 7 miles 
to 10 cents for 136 miles. As pianos and furniture are not exact- 
ly light in weight, they are probably placed in the first class 


because of their high value. 


7. Mcpherson, L.G., Railroad Freight Rates in relation to the 


Industry and Commerce of the United States, 
p.t48. 


_ — . 
LNG IS: 


nant 


Sel —- 
4 sttomsoog | s mows 
ee 


The second class embraced "dry goods, shoes, glass, paint, 
Glassware, drugs, raisins, figs, dates, spirits, turpentine, 
featners, stoves, hollow ware, bows and shafts, pepper, spice, 
ginger." For these articles the charge was per 100 pounds, rang- 
ing from 25 cents for 25 miles to 50 cents for 136 miles. Here 
again, the inclusion of feathers and stoves in the same class 
implies that commercial as well as transportation conditions 
received consideration. 

The third class included "butter, peas, lard, rope, 
tobacco, leather, dry hides, tin, copper, cast steel, machinery 
in boxes, coils of wire, carriage springs and axles, rice, soap, 
candles, oil wheat, lead, wool, dressed marble, mahogany bed-steads 
old furniture." The charge was applied per 100 pounds ranging froz 


18 cents for 25 miles to 40 cents for 136 miles. 


The fourth class comprised "bacon, coffee, sugar, nails, 


spikes, ice, steel, pig and bar iron, grind and mill stones, coal, 
potash, iron railings, stone, hay, railroad wheels and axles, car 
springs, copper ore etc." Here again the charge was applied per 
100 pounds, ranging from 15 cents for 25 miles to 39 cents for 136 
miles. 

The development of the classifications and rate adjust- 
ments outlined above is that which took place, generally speaking, 
between the building of the first railroads and the development of 
through traffic succeeding the Civil War. During the initial steps 


of this development, the practices of one railroad had no immediate 


3 ——— os ea. AAs i 


= —— : ,2eote , shoes yh" heseudais teols Succes @ 
sulinequtd ,eti¢eics ,setai (anit vanietee ae 
~Soics. ,tocaged ‘ Mlete Bae aewod eter wollomw + 
chaveq. 90? 16q eaF eatede ant ue Set 
wh .selts o€! Sob Benes Ge ae wet tis tg 10F at 
= ae sro" nt gevore one Biante , not 

‘Slhneo coli’ sreqetiat Si iiew aa fee 


of diag 
dl 


,ove1 ,fbual ,oteq .tedsed” Bebiutont eaaee 
filfoam ,feetTa Jee Asti mit poeblt yd rb 

.qeon ,esits \4elee Sete asifage epebipan 4ene 
.oletam Deesett \Téow baok 1 

iaoet epmved OOl seq beliogs ear azrtanin 
-2otin @€% 101 gdneo OF oF 

.cciteo .so0ed” Khealdqgso wees £ 

(fao> , t te. fore Datta wont ted fae wie oe 
BSla » aloanw beowlinr "Gel yedore 4 
te Ss atv egwito edd steps etell” “lose 2%0+ 


7 i 


Ck of seltn @8 40? edneo BI 


nueie eee bax svolteoltiasrto eff te ga 
‘itveqa vilereney ,eoate tees motse tact ef 
{ol6veb ant Bre sheonttere"Saelt eid Yo 7 tb 

Paese letting oi! poled ae £e0)0 ene aperanant' zt 
Pp’ ribomet on best baorlles ene Eo heoldonng ond ‘ 


ae = > eee a Se ae ee 
: 


69 


and direct effect upon those of another. Each railroad developed 


its own individual classification applicable to local traffic, With 


the growth of long distance traffic and of the need for through rated, 


through routes and through way-bills, an expansion of classification 
was needed. By 1886, in the East, there had come to be about 1,000 
items, In the following year, the first Official Classification 


increased to 2,800 items. The same thing was true of the Western 


Classification. The peer of commodities classified by name had 
increased to 1,658 items. In 1890, the Official Classification 
included 5,747 items, and the Western, 3,859, and the Southern, 1,854, 

Making the classification is a part of making the EREO, 
as we know from the very beginning of the railway enterprises. A 
classification by itself is of no use. Grouping commodities into 
defferent classes serves no purpose except to prepare a basis for 
the application of charges. Making the classification is merely 
the first step in rate making, and the second is the determination 
of what the charges per pana ed weight shall be for each class of 
goods. Therefore, every company must prepare a large number of 
"Class tariffs and "commodity tariffs." 

Class tariffs based upon classifications as distinguished 
from tariffs upon specific commodities, are of two kinds-Local and 
Joint. Local class tariffs are issued by an individual railway com- 
pany for the rates uvon the different classes of traffic between 


| stations upon the same road. Joint class tariffs are issued by the 


8. Ripley, W.Z., Railroad Rates and Regulations, p.309. 
9. Dewsnup, E.R., Freight Classification, p.3. 


~o¥ © 
© hA abOO.. 
° | ? 
L Ae 
cf 
= Sa 
i Sy 
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ga 
aa 
~m * 
€ to ma 
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aL fi i 
oo a 
t< r 
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evcec ol wr. r' 


beveel vie etivined sebis gakot chaos aes 
< sus é ; 


-2085¢ iol spluneh bap goteh beowt age “ 


otiiet nomi ,.tecifoms To esohd goaw oo 


heed ee to fue obttent esaetels 
ofemreqys ge ,aflid-_ar — 
ence Rad execs eat ont aad 
LelLoeTas gangs ony , | 
oud aaw guide eee oat 2 


fh &.€ ,ctredae® odd bas 
io ¢xsac » ef nobpeottigsaio 
(ewiten edd to gakuniged Ter 
© pttquer) ony om Wras vanes 
ony of ItOoKe eeog sy on : 
olileeslo end patie seg Tets: 


ow? to ote pet’ lboamoe olttoeqe 
= ¢ 


of eidaclingde naolleoltigesia fei 
aah 


oA! 


% 


sele aeltibampes To ste 
B~ ts" 


isti2 paz ORE ol. 7 


vs 


ol Srooes ont bae ,Anidaat ofet 
ed Ifst» ddgtew Derthemus T8t 
2 etayjotq casa Yileques reve x. 

‘ ,ottiates yiifpomoo" 
teoliinssio ooqu heaad attttad | 


to aslo SnerevIib ety <r 


é 


= 


eh: 


70 


agreement of two or more connecting lines and give the rates 
between stations upon different roads. 

Commodity tariffs contain the charges upon specific 
commodities. They are entirely outside the classification, each 
railroad company reserves the right to give certain articles com- 
modity rates which as a general rule apply to heavy or bulky com- 
modities, such as grain, lumber, coal, iron, fertilizers, live 
stock, and oil. 

Commodity rates are usually lower than would be the case 
under class rates. This is due to a variety of reasons. Compe- 
tition with water routes may necessitate consessions in charges. 
This is especially so in the case of transcontinental traffic. 
Railroads desire to promote the interests of manufactures within 
their territory and commodity rates enable such manufactures to 
reach out into new markets. Commodity rates may also be granted 
to enable a new industry along the line of the railroad to Ce 
lish itself in competition with established industries elsewhere. 

Rates in this country are not, in form, upon a mileage 
basis. They are seldom so in fact. In making tariffs, the deter- 
mining factores differ from those governing the making of classi-~ 
ase cas « The classifications govern the relation of charges; 
the tariff, the specific charge. Rate-making in this country has 
presented many difficult and complex problems. In the first place 
the country possesses a wide variety of geographic, social and 


economic conditions which have influenced materially the evolution 


{1% Johnson and Van Metre, Frinciples of Railroad Transportation, 
2. pp ~ 335-354. 


a 


— ee 


p aLOLI eS togens:T beogi tal to asefetonte C 


* 
° 
o 
bi ¢ 
. 
+" 
- _ 


ne ae ee ae a * "a 


noo elit hi Batwtesretet  euaaifo’ oftosan”e Le 
facil suid ol J. smeideona xelored Bae we 


eve ofe yilaetcesed sic aatt ae ved ssi 


9 


via One eesti polttoonios ‘erom go one 


,oheoy JmetsT Tin nogu SHE ti 

eeymweio oft niadnoo elite we 0 4 
tiaaelo eid eblejuc eleutiae @48 Vv ae 

9° avin of yogis a ae coy zeae 


vicve Ging ee & ae 


> 
> 


fort , eee  iedarl rian 
swol vllewey ses eedst @ rf 
f io usstusy © 6¢ Gh. db slat Gy 
leieagoo svetlesscam yam eect ' 
c SJusid*hoosne.s) lo seed ba al ae 
2m 19 hcderedal sie edanoug oF 
Us eldain> secsey yt Lheaaee bra ie 
2a sotert ytlbommed -.e degen 
t beotllicx yY to entL ont Biols’ rideubah 4 
irtesbni beralidvetae Sele Bots iven 
-wrot af .ton ete tnfoted atte ae 
y ,sitltet gaioleg al «#682 Ae ee aoblen 6 67 
oft palovevoy esons god? rer tbe 
if © folteter ofd RISVC x anciynortienate. 


» 
» 


etooe  oldqstgoe Io [tePter obly a Ga. 


+4 ‘ 


oe i . c 
wv; a \ i 
ee 
M iF 
- 2 cre. 7 a 
— ir 
: . +> 


of rate structures. Secondly, the dissimilar conditions prevailing 
in the eastern, western trans-Mississippi and southern sections of 
the country have brought into existence in all of these sections 
peculiar rate systems, and lastly the effect of international com- 
petition on foreign trade has made the creation of a system of rates 


for export and import traffic different from the rates applying to 
12 


a 


domestic traffic. In a word, owing to the physical and commercial 
conditions, different railroads within the same classification must 
make very different rates for similar services and prevent them 
from making the same charge for the same haulage. 

The freigsht-rate system of the Trunk Line Territory 
demonstrates certain principles in railway e@onomics. Here the 
traffic has been the most dense and at the same time the most diver 
sified; and here competition, industrial and transportational, has 
been the keenest. It is in this territory, that the best thought 
has been directed to a solution of the problems of operation and 
traffic. A uniform classification and Schedule of rates were for- 


mulated by the Joint Esecutive Committee, who, as early as 1879, 
1 


3 
began to enter this enormously difficult task. It was here that 


the application of a practical distance basis was completely made. 
The system was that railway charges should be proportioned to the 
length of haul. The rates on the east-and-west bound traffic of 


this territory are based on the rates of the shortest route between 


12. Johnson and Van Metre, vrinciples of Railroad Transportation, 
p.554. 


13. Raper, C.L,, Railway Transportation, p.232. 


—— Ty a et’ se A de N a inh! c= ~ 
° 
i 
. Sos fin itsalS ‘end aN ‘Driooek Po Ligon 


-soew oretnaew 


es orednize ofet tinged 


+ nj lla AS en. lamp 
‘ 


mel'ie ony vicgeai bie omgws 
eto ect wien set obese ie 
' iene 
“ toeeastweb ofTieis Gadel 


td 


eas OF Biiwo on a at lay: 


a Say Se iW Bhe orlior #9 
fimte oy saelaaln 
iad oa aig ‘TOT egiteno 
f a tal 4 I " re rove ia ec at 0L6 : .. 
; miley al eelytontag alate 
- t Js fos coast Jeom ene Gam 


j ’ i 5 


‘ce leisrathiad (cefdtieqioo ae 

,vcrotitted elnd af ah ore a | 

oat Yo aobtiiLos @ oF ode 

s(ubeno® bas acksact¥inears aro CE 

4 : on ed thinset witvoee® Jalot 
i et enw #4 stead WiarokTT ih V femoarrors ont 


P| - : (less [wi "4 GA Lodi eoreteld fanitoet? a m6 ; 


hn 
- ae 


of herolmeogenq ef blvede sebtaie pewhbar ; 
i? Bavod seew-fine-dene eff Ao neta SEP 


Neewle¢ ocuut teettodis ent: To segee edd ho oe 


- 4 


fe 


New York and Chicago; and all the through rates have, with some 
comparatively slight exceptions, been percentages of this basal 
rate, the percentage being roughly the ratio which the distance 
between any two points in question bears to the distance between 
New York and tana 

The structure of rate-making in the Southern Territory 


is known as the basing-point system. The origin of this system is 


due to certain natural features of soutnern territory. The first 
1 


of these is its scattered and relatively thin settlement. Density 
of population varies between one-third and one-fourth of that in 
the northern states. This greatly limits the volume of local busi- 
ness. In the second place, agriculture, especially the cultivation 
of cotton, has been the absorbing enterprise of the southern states 
The business is largely seasonal in character; and the profits of 
the carriers, in the early days, had to be made between September 
and January. This concentration of interest in the movement of the 
cotton crop has been changed as it was being supplanted by 2 gen- 
eral movement of traffic. But the rate system in force is an out- 
growth of the conditions prevalent in the early days. the wide- 
spread existence of water competition is another complication in 
the rate-making of the southern states. Its entire territory is 
threaded with a series of more or less navigable watercourses which 
penetrate from the seaboard or the Mississippi River, far into the 


interior. There was active competition between the railways and 


14, Ripley, W.Z., Railroad Rates and Regulation, p.360. 
15. Ibid., p.384. 


ss 


"TOL ¢m RUS ie eee 


even sevat davowmy eff Lis bas 4{opeoine . 
iy segatinsoteg weed ,aauliqgecxe siaiign 
ioldw olv/at eft Eftdagda soted 


ent of axreed nolveseup me @ 


isfuo0 ect a Sobsiaseed ae! zo fine 
(fatxo od? motes indoges 
.yratliited naeneres 16 sewitro? ‘ten 
slivteo aint vlovivaiet bra bexsdas 
eco ie Ovitijeaso segwied 

of eflall yiogesy stuT 

-f Seo su ivoi tag eonta fy 

ac htquadne naitdroada ent | 


, ©se jtofostatis ni Jenoenes vfegtal | 
=) ha 

"Jed Q@Dpas oa Of Das aged vitee add 
a oS! of desyedat 10 noltetinesties & 


sicalqdys poled saw vf 66 bommado sc 


25% ni welazve edgar aif 28 ol ient = 


| ,tovill tetttaetnadw eng wo breotaen ead 


ic) eiftde afl yestete Aapitvos emg to 


- ag 4 
ech Vinee ent af tae Leven ano ttl Brag, 


ov 
aco sedtone ef moltidenwao ister to. 


Eee | : 
jow eldagtven esat to exes To aolres aa 


$s od cedwited Bold téequoo evivos aay 


fe 


the waterways for the transportation of the products that were 
collected in these interior centers. In order to secure a portion 
of the traffic the railroads were forced to meet the rates of the 
water lines at competitive points, while at non-competitive points, 
they were able to charge higher rates. = 


The principle of the bpasing-point- system is this: "Cer- 


tain cities are established as basing points, and rates to all 


other places in that neighborhood are made by adding to the through 


rate into the basing point, the local from that city to the final 
destination. Since local rates in the South, based upon slender 
local traffic, are always exceedingly high, this appears to confer 
a very great advantage in the matter of charges on the cities thus 
favored." ‘this system of rates is most certainly not one of abso- 
lute justice and fairness to all places. From this point of view, 
it cannot stand comparison with the distance principle. As it is 
applied more and more the"basing-point" rate system in the south 
will no longer be needed, 

In the region west of Lake Michigan and of the Mississi 
ppi River south of Wisconsin a tnird general system of railway 
charges has been established. It is a system oi differentials based 
upon the rates from New York to Chicago and St. Louis. this system 
was created because of the rivalry of Chicago and St.-.Louis as dis- 
tributing centers for the trade ot the Mississippi Valley and the 
central west. ‘thus it has a marked effect on the rate structure in 


this region. On the traffic which moved westward from the two cen- 


15. Ripley, W.Z., Railroad Rates and Regulation, p.384. 


ew tend e¢subonq edt lo moltataoquamnr aie aoe, 
1 gz e1psdee of weohto al.  .a@eetmes tolsotent acon, 
eis eeses ott feenm ot baoto? enew abeori tee 
tifeqneo-n0n é@&@ elivw  ,adateq. evigt 
20024 iat las 

sa tave rt toy~Satead aud 3o 

s od eater Boe edALog wa Lewd os senatl 
i os bbe yd eben @iR boosidis ten a 

; jest mors Laces osit—~dntog , 
,ftno8 aay me awean ‘tana? 5) 

(etac ice eled syle Pignkbegere eyeraa 
i ped co! mo eo_neds So tedgem sap uit 
“ond on or Jeiieo feos ef eeset 76 eye 4 


potd ,seoeta Lis of rent i 


eiglons eoneteld ess ait wou rn 


a 


Jece ots “tartoq=titead*edds S10ml 
es me a 

One tagidelMt ofal te ¢eew aelget eats 

eteays Leieqe”g Paine & alLecooslw to 
inetstilh ie medeye & O£.88 horasidates & 
ptt oluod .J@ bas onesidd 0? tr0¥ well mo 
givol .c& Bee apesld? to pulerit age 10. 
yotfey ber tLaeteell et, as ohat? ond 208 
x 


Wile etet edt no dostte baveas as ena $i 
“109 OWT ond wont'l S xaewdaew Seven doime wn sr 


- 


74 


ters, St. Louis and Chicago, to the Missouri River cities, the 
railroads fixed such rates as would enable products moving from or 
through either of these centers to be marketed in the Missouri 
River towns at practically equal prices. Such a system of rates 
made it possible for the Missouri River cities, Chicago and St. 
Louis, to compete as market centers for the commodities of a vast 
territory to the west and south oi them, 

The rates applying to the transcontinental lines has been 
in many ways like that in the territory of the Southern Classifi- 
cation. Their traific has been strongly influenced by the compe- 
tition of water carriers, as it could move westward by way of the 
Istnumus of Panama and around South America; likewise for the east 
ward traffic. to meet this water competition, the transcontinenta 
railways have been compelled to make low peroer rates in order to 
enable them to secure a portion of the eet Secondly, most 
of the transcontinental lines, except the Southern racific with its 
eastern terminus at New Orieans, nave had a speciai interest in 
building up both manufacturing and jobbing poe at their east@- 
ern terminals at Chicago or Missouri River points. Such a policy 
enabled them to secure the whole traffic for the transportation of | 
commodities to the Facific coast, without the necessity of a pro- 
rating division, as when goods are hauled trom the Atlantic sea- 
board cities. The situation as such resolved itself into a compe-~ 
tition of markets. Chicago, St. Louis, and St. raul were pitted 


against New York, Philadelphia, and other Atlantic cities in ri- 


16.:Johnson, Principles of Railroad Transportation, p.360. 
17. Ripley, W.Z., Railroad Rates and Reguiation, 0.397. 


iz 


f _ oii) ‘irs | ek eae tines oF See) oi ods. 
‘napa bins tuowstN ead o¢ yogaodtOr bas «homme 
: Y py a? .c oDiete binew as @63es dopkle | 
i sooie. Laspy ol Ceostonag y 
/ , cidlo “ewth Deyoeetil elf et a Tt 
. | Pareles t 
we to!) euagaes jotta sa ous m 
asad Teo Mdods Bre deem are 
Z rem 3 if om? of assy fiqqe nese! 
. > nov baer dee at sacs 6 ah 
h sth ceed ead Neer 
Liov #1 e& ,290htrep em 
a mat noses Aaweta Sree 4 | 
oo te lew eit deem ot tye 
Aa 
| eo oS Deolleqaos mel 
, tie! see Terneheaegen ausoee 
jooxe , densest Letdontar a“ 
; ova , ates, 70 well ge & ote 
Lng ‘ot One pales catia , 
. ifoe 2 dow! -otaleq tert iuwvoserl 40-oyaatag r 
“SO7GnL is ef 10Tl sities elome saz enos@ os « 
rreeoos as suvode ie sieads oLiios’d ond os 
Z -) 
, oS mot? beived ete sbooy Heme eee z 
, 
hm tac IfLesdst Bevsoast elses GE nottang teed? 6 
5) erten Li JG oe ,phyed wwe 1 ORHoRY | sox ¢ 


in 


aslivio olénarizé senda Soe etiqletal eae: 3 


« O9€.. ‘F tok Pa Q oie at 4 “tj e ¢ 4 Co. ST, 
4 =~ = a =e aT ae 
DIR 
~Y°C.9 sSolitelimnes Bae e@ ie DEOL, * 
" : Ce he Gk el ens 


ee es ee re 


valry tor the trade of the Pacific coast. In order to benefit the 


cities in which they had a peculiar interest, the all-rail lines 


have made a rate system with the following features: (1) Blanket 


rates are given for both class and commodity shipments, on the 


westward haul from most points east of the Mississippi River to the 


Facific coast. As a consequence, every city east of the Mississipph, 
for some years, has been obliged to ship goods to San Francisco at 
the same rate which is paid from Boston and New York, which may be 
more than a thousand miles farther away. (2) On the traffic which 
moved westward to intermediate points in the Rocky Mountains, the 
railways fixed a charge higher than the through rates, the higher 
charge being fixed by the addition to the through rate of either 
fixed amounts or the local rates back from the Pacific terminals. 
The defence of the railways for this situation was that the low 
through rates were compelled by water aerietiiiien! 

On many commodities imported into, and exported from 
the United States, the railway charges between seaports and inter- 
ior markets are less than the charges on the same commodities 
shipped on domestic trade. The outcome of this situation was due 
to the keen competition among the railway carriers, the low charges 
of ocean transportation and the trade rivalry of seaports. 

(C) Pooling and Rate-making 


The railway business in the United States, as in 


Great Britain, was for a number of years, regarded as entirely 


18. Ripley, W.Z, Railroad Rates and Regulation, p40v. 


See ea eS eS -— ee vn vy r 
ae. 7 ; 


y eit ti Tere $j} teD16 G2 .,vesoo ohtlvst eae to sie 
Ss 
. + 
f Tae j .Jeenedmst qaiigosy « bat yeds game 


ood civ peteya sea 


ee — 
~ 


; 3% i iivommes hae saatlo Aged 707 


sav To 2R8o ayaieog Jom are : 


ie al 
a 5 (09 ,BOneupeENo® 6 mA ie 


of fe OF Bepifdo need eat ame 
, ce 
(21c. wel Sin cote mort Biase dotdw 


| Toe | ) .@We teddust setiea hitweu ond? 


if etdbog eis  henmrednel ot Y 
if teds teifgld oyaais 


{ 

} ’ OF aoltrhbe edt yd Be 

5 

a ‘tT donpd novet Laoal eee ) 

4 x z-} 
e 


fouiie elds tet swvewlien ode’ 3 

, icemos Tsiew ve bel fequien 

: I * I ‘Yel aslgthouwoo View 

sup tacsic Vann See ale — ; 

us Ao Beprerto- end” sald seel'® 

) . t mewn eff ebherd old 


s Awitces ‘yemp ise ye) eens eee 


; é »t (Oo Erlevie ofede ok Bre meltazrodeke 
| aitl Xem~ed a Bia 


n coset fovlal ent af Gaewtebet Cenllos ed? 7 
3 . 2 - - : 5 
gio ce DeOtepet SO TSey fo Wee |e tot oaw' 


ordinary. I1t was assumed to be, like any other branch of business 
enterprise, a thing which competition could efficiently regulate. 
It was thought by the public that railway charges could be reduced 
by the force of competition. The assumption that competition re- 
gulates charges does not hold good with respect to direct railroad 
competition. As we saw in examining its underlying principles, a 
railroad represents a permanent investment. Competition may force 
down rates, and the road go into bankruptcy, but it does not cease 
operation. Its ownership may change hands through foreclosures, 
but the struggle for business goes on. The deeper a railroad is 
involved the more vigorously will it endeavor to obtain traffic 
and the lower will it cut rates. Unrestrained competition among 


railroads instead of acting as a regulator of rates often produces 


1: 
rate wars, discriminations, and insovency. 


Such being the nature of competition in railway affair 
some means for regulating its action are necessary if the service 
of railroad transportation is to be performed with profit to the 
companies having it in charge and in:accordance with the best 
interests of the public. With these points in view, competition 
among railroads must be stopped. But they cannot stop unless by 
common consent. Thus agreements to maintain rates among railroad 
carriers come into existence and serve as an alternative for com- 
petition. During the early seventies these agreements Were com- 
mon and were entered into openly. They were generally executed by 
the general freight agents of the competing roads. lnhese agree- 


ments in many cases worked well because rates were maintained and 


ee ee Se en) eee ee eee a >) ee Che 


( es ieito ys exli ,e¢ of bebowaer sas a2 


ow 


Vitequao solsiw pats 
‘i wmio Yewllet Jadd obieva eng) ve 


'Temucns sat .gseleigeqsog as 


—-. & 


ai ij ?oornet aoie Soom Phon ‘on 20oh at ‘ 


i Na, 


, 7 illite ri wee wise 7 


tfnevel sieilerteqg 2 adn 


8 9, Masta osnt on haeot oud . 
en anrano AS asta tens adi > 
cc seen ssentend 408 . | 
y ehre tL Lit w yisnotoniv oti 6 
1 feerirtt sovat. dua SE Like ge 


art 6 nniitoe to. 5 se 


. , wonevound bar nroldentent out 
} --Ji'sqems to swat i sated @ 
6 folsor atl gutjriuged 
‘et ad of 6f notvatuogar 
| ) ach al See epee at ot é 
‘ 0 , Wedd iniog: eaed goin Ot Liao, ; 
ines (sol JM ,beuiede ed Jou, 

sole Of e¢neiesias ast? 

Mane évine ine ae I 

2" iosMeetee eset rehéneyek vite ost 2 
otsy Ytadl ..¢ineco a 

foo) ,eSeos @yivadsss- sas Ts etaege 


cles gow ee dam 42n4enec! i Lew re 4 


disastrous competition avoided. But on the other hand, nany were 
failed. They failed because there was too much inducements to 
break them, and no authority to enforce them. They were wholly 
based upon confidence. When they believed that other roads were 
making concessions to secure traffic, they made concessions then- 
selves. An agreement which each party fails to live up to is ofte 
worse than no agreement. Its result is to substitute secrest com- 
petition for that which is open, and the former is worse than the 
latter. 

If agreements to maintain rates could be made enforceable 
many of the difficulties attending them would be obviated. But 
the difficulty with all rate agreements, whether enforceable or un 
enforceable, is that they do not remove the incentive to competi- 
tion. The railroad officials soon recognized this in the case of 
the early rate agreements. They saw that the railway, in order to 
avoid the effect of railway competition, was to remove the induce- 
ment to compete. With this object in view, they resorted to pool- 
ing. 

A railroad pool, as defined by Noyes, is an agreement 
between competing railroads to apportion competing business. More 
precisely, it is an agreement made by several railroads competing 
for business to allot to each a stated percentage of the whole com 


petitive traffic, or of the receipts thereof, together with a mu- 


tual guaranty that each road shall receive its share. The purpose 


of pooling is to maintain rates and remove the incentive to com- 


petition, 


co i ic Seghteh e&@.,foog Bao 


pin eth eubeows LLasie bakes stone a: 


imeoat atid svonen Bie a sisenieny 


ro Jp ( bebiove Hold liom | 
> ow eupnd eevaosd BeLiat 


~ ae 
a 


: > esoainine of ye htodeue on Be 
ome, 
i , » i 
bev ¢ vecs oot conebdly® 
; a 
,llitew swssen of SNIGiam 
a 


\ _ _ , » 

] viseccatote noldw Be it 
‘ aesee * 
: jiggen etl , Jaomeetaae 


k 


ag hats ,geqeo et doi tet 


— 


Tie lam od atneneen . ey 
w wedt gulbasi2e eoltlvott® 
.stnencoine etes fie atin : 
ft evomet 76% ob. Vere. sant | ria 
Od oon efalokl?Tto Bae | 
+ wee yedt  Cenemee Tae 
weltJisequeo vawliet to 


.welv fl toetdo eff? ce 


itd eqerrc itnorqa oF ebectliar 
25% Lesevea 4d ebag Inemeo me ge 8 7 
neoloy besejge & dpde of soils Oo 


+ 


r , -oetedi! es TLeoet ont te ); onthe 


_ 


78 


Railroad pools are of two kinds: (1) traffic pools; (2) 
money pools. 

A traffic pool is an agreement whereby each member is 
assured of receiving only a stated percentage of the competitive 
traffic. The percentage of this competitive traffic is determined 
by the share of total traffic which each railroad carries under 
normal and peaceful conditions of rivalry. If any member of the 
pool has received less than its allotment of the traffic, the organ 
ization having the management of the pool in charge requires the 
railroads hauling more than their alloted share of the traffic to 
pay a stipulated portion of the receipts from the excess to those 
roads hauling less than their alloted percentage. 

A money pool is an agreement whereby each member is assu~ 


red of receiving only a stated percentage of the receipts from 


competitive traffic. It may be based either upon gross or net earn 


ings. The percentages of the members are determined by past earn- 
ings. But as one road might incur extra expenses in moving a far 
greater bulk of traffic than its proportion of the earnings called 
for, it was customary for each road to retain a third or a half of 
the revenue it derives from that traffic, and to turn the remainder 
of the receipts into the pool, to be distributed veriodically among 
the pooling roads in accordance with the percentages stipulated in 
the Be eee 


The first important railroad pool was established in 1870. 


The Northwestern, the Rock Island and the Burlington Roads which 


19. Noyes, W.C., American Railroad Rates, p.139. 


tan -*t ©, nocu seréle Sstad ed Ware “Fs 


;tloca olttet? (') tebatal ows Io ete aiege es 


ecnsc 2285 YORE t frees este ga 42 Leog 
moo wid tc spethes ied betate 2 tae 

ren? evitijovoqnos aid? Tée ae 

\ a 

iitea dees Meise pittet ew 

ce tae 1] er lew eee Bdehetaaoe a 

tit , oil wit ef? Io dpemeORin eer sane | 
2 sanlo af foam ene 10 tasrieganse 8 

Ite snicg~ic etmis betolin “ied? gene 
eave sort tigtevet eit fe ae 
shedivcuweq Bbelielle 22egF nett a 

j 2 9 Ytevouwy Shensstye GA SE 
ecet oft Yo- egadconteg Sedata a <n 


wiluteteh ete atednem elif 36 saan 

1! ss2so9gen eee user Jitey Eee bebe 

isis e023 jo aoliaeqntd eb. ae niet r0 

‘log #« tlLetjey of Biot dose or 

si ond iow of She (ob Vhewt oaag aos? sovint 
solictieq Setudlwelb ed AF (ood etd ovat s 

ies ransinecieq at Ao hw -eorteitesem Bl ae is 


os 9 


we ty 


e a . 
s 


beraiidetcs eaw Looe feeti fas snadeoqms Jt 8 
7 Sol sovent ina end Jhets hugxlel Apo eH; 


; 7 aie 
~ | ; re, 


AVG cise 23, , 


i =o - 7 ie ee 


19 


connected Chicago and Omaha, were not far different in financial 
means and had about equal facilities for hauling the traffic. 
Accordingly a pooling agreement was made alloting to each road a 
third of the business. This pool was successfully maintained for 
fourteen years. In 1884 it was merged into the Western Freight 
Be ei skion 

Another railway pool in this country was the Southern 
Railway and Steamship Association, established in 1873-75. This 
came later to cover the terrirory east of the Mississippi River and 
south of the Ohio and Potomac. The pool covered only the cotton 
business of the roads. Its members were both railroads and steam- 
ship lines. Under such a pool, all rates for the competitive tra- 
ffic were directly controlled by a general commissioner with large 
powers acting under the supervision of an executive er rece This 
association continued its power until it was declared illegal in 
1887. 

The traffic between the Atlantic seaboard and the Middle 
West was ruinous to all competitors. Its pooling was by far the 
most difficult to make and enforce. After three years of strife, 
much of which consisted of violent rate wars,there followed the 
failure of the Saratoga Conference; a pooling agreement was finally 
effected between the chief lines of this territory. An executive 
committee of the Trunk Line Association, composed of the Pennsyl- 


vania, the New York Central, The Erie and the Baltimore and Ohio 


20. Johnson and Van Metre, Principles of Railroad Transportation, 
pp .294-95. 


21. Noyes, W.C., American Railroad Rates, p.143. 


ry 
A 


ey 


oflo? erent, ster, ans dpb folveta hese 


183 To bosoqmes .miit’shouneA enki) aes?) 


of JoeneTtlS en for evee  elien® Bae 
i aet g@el¢ilioegt Taupe daede 

alioile shan sew Shesgeepa gal 

‘ec yl ieineeobye ear fooq elihare 


ot ond bene ese bf ABBE 
om. 


per) 


oo nice at Looeg cowl lar 
-=\St-o2 Sondelidedue:: eobtaloogm 


i) ae 
i 


‘Galk edt To done tonto oid 
nevoo foow dad? ~,oamevet baw 

cod ea 19 efetgem 2dDes 

“oo of) (Ol ee@et Lia (foee # oem 
‘moo Le pstem 2 yd Beltondnoes 


? in 


ie 
vitJocexe a ‘te aeloalvarbeia ete 


fetiloee aww tb ida sesog art & 
YLEOCC aos ‘Os {jostled en? geowded 
of 7 re Ud ava satel leeqmoo ils of 


1fOy sets sottA ,eon0Tpe bap een 


tnenee'tae antioag #  eontwes ta00 2yod an 


s& .Ytotities afd¢ 40 saath teide end 


stort’ ie8 eft Ane aia8 osfl. . Lerttaed. ‘ 
\ 


80 


was created. In 1877 the westbound traffie from New York was 


apportioned between these four lines and in 1879 eastbound traffic 


was included. During this year a Joint Executive Committee was 


founded to supervise the pooled business and to apportion the 


"Qifferential"rates which Philadelphia and Baltimore should have 
22 
as compared with New York and Boston on the western business. In 


1885, it was reconstructed as a2 money pool with monthly deposits 


The Joint Executive Committee continued as 


and settlements. 


effective pooling organization until 1887 when pooling feature was 


necessarily eliminated. 


While the pools mentioned were the most important, many 


other pools existed in the United States in the year preceding 1387 


the Southwestern Association came in 1876; and from 1876-1887 


there were formed the Northwestern, the Colorado, the Western, the 


Pacific Coast, and the Transcontinental, Associations. 


The result of pooling agreements to railroad rates is 


this. It is not designed to increase charges. The purpose of a 


pool is merely to make rates uniform as well as stable. In the 


seventies and early eighties, as we know, when pools were most 


prevalent in this country, rates steadily declined. Can a pool, 


then, check the decline in rates? In so far as direct competitio 


tended to accelerate the decline, pooling, by eliminating that 


competition, tended to stay it. However, direct competition was 


not an important factor in making the general decline in charges. 


22. Raver, C.L., Railway Transportation, p.209. 


7 eee Se I SEs Sint oe ae 
a a al RE ae a Sas we eaee EA cm oe aera _ = 


‘am siel wei mort ofTlest kuwoddiow ens Piet cee 
aTiew OHousoitees CySt af Ane eenli aue® ease ee8 
as? eectiar evituserd vatot se «sey sHRP as 
i iojstogvs of. Bae sects Reload ens, 
Wed bivede osoalsie® Bip eltqlebelints aotdw 
; rietnew efit nO shoal sis hie ae 
aore! ititvnon sfiw frog veces * ee bestou 
cLinoo soi stimeo? ei sega walee! 

so1 poiilcoo? meriw TSS) £ige mukdesd | 


we 


~: 
JOSS ioms Trem eng eveW Bend ieee sieog off” 
siibecsete ‘iaey ent at eedavd peyiwt Gas ae 
1-340 owt ue (OTS! sf ened Holeptagenll 

at ,qnetaeW J ,obrre fed’ eng rede owilrON eds 
Hse oGawh _ [esusattnewehiet eds NE 

PEVULES OF RitOORISS Bit tood Io ths 

f seo ra ef) -ASSTSHo Sbde tent oF henyteesd 


, 
fa) 
% 
s 


ce es [low ee omo'ting sede eaten oo % 
o.2W Gioog ceriw .wond sm ER) Shigmete teas | 
eio09 B&B meu , Senifosh yilbsesu bathe Vivabee etn & 

‘a Gl Seecet al salToeb’ 
fasta pet tecntmys fore ert ivog oatloed eas 
OLI.L Set Toot  tevewoeH - . df yatacas S Dy 
“is of enlioeb leprae ced ai latsm mt Tos 68% ‘ 


> 
* 
ry , “ 
A) 
« ~ ow ‘ 
Ps 
4 4% 
So eee aes eee fo = pe _ = 
2 rs ean 
- “” ~ 
S = 4 a al 7. 


81 


It acted only upon competitive rates and tended rather to make 
local charges up than down. Rates steadily declined under the 
pooling agreements and cannot be safely asserted that they would 
have een much faster if the pools had not existed. In fact, 
the pools by eliminating ruthless competition enabled the railroads, 
the better to avail themselves of those physical improvements whic 


were the most important factors in bringing about the decline in 


charges. 


beiteec? ¥ieten of cornmepshae 


16 feel disetmne ave ladies: santa 


Sshi97 hee selat sv ie ieegneg: go 
vel yl liette. wee ea- . , Obra res 


oe 168 Bad elood: eff Zs seten 


oleyie goood ve cov cone 
satocbete Fore rn 


ah. 
“hd r Pe ~ , 7 7 
. on ae 
¥ eae ‘ : 
. — Ac 
ae i ni ; 
_— ey a : 
= = iv 


CHAPTER VII 


Competition of Railways with Waterways 


(A) Origin of rail and water competition 

Before the introduction of railways in the United 
States, the rivers and lakes were the main highways of traffic be- 
tween the interior and the seaboard, and the chief centers of trade | 
were the seaports and cities located on navigable waters. When 
the early railroads were constructed, they were naturally made to 
G€onnect the ports with inland markets. In order to secure a portio 
of the traffic the railroads were compelled to compete with the 
rival water routes, thus the carriage of coal by the Reading Rail- 
road from the Schuylkill regions to tide water in competition with 
the Schuylkill Canal, and the carriage of flour over the New York 
Central in competition with the Erie Canal, and the Illinois 


Central in competition withcthe Mississippi for a thousand miles 
1 


and all over the south as a freight carrier. 
(B) Reasons why Waterways could not successfully compete with 
Railways 

An important reason why the rivers and canals of the 
United States have been unable successfully to compete with the 
railways has been the natural inconvenience of the service rendered 
by the boats. When a shipper requires rapid transit for his 
freight or for the continuation of all classes of freight move- 
ments, the railroad is favorable, especially in the winter months 
when the rivers and canals were closed by ice or when freshets 


1, Ringwalt, Development of Transportation System in the United 
States, p.113. 


ee ee 


tiV AYMtAHO 
wrodel agt® eyowlleR fo petdivegeas il 


SoltiJwEgmes yetew bas 

ad Si e¢ewilan to nod SoubetsHe ont @ 

ei? ‘to o¥seng ll gine Gay ois" satel Arie 
etorieo Telco eit Seo (Baeeesee ene) meee 
-ciovew sidenives ao Beeeeor sbtvio 
o e188 (ond (badouutedpo ona AB 

“i .aJectvem' imme Lek sie kee at 

>? hod léamon Sew ebsorchbars 

13 yd [eoo Yo saatutbo ea) sone 
. stew OAL? of enokned I - 

ivf. To ebeltres €ff Bee © 

io, Tene® ei ont Vittw notin 

is 2 10% Ioteeteett aivaditw sole ; 
| ee itglekd # oa nt : 
(iivleseooue ¢én Bigeo éyewso tal, r: 

s sxevit old Ude. aoeeet Sa 

Sled . (li toGaqecous efdeny aeed 
- ods 16 evneiaevooont Tendans ecg 
(O° Jivnoent bigest venting ceqalae 20 M 
Lext to aseeals- Jin te aottpuntinos est 
(94 Ot \tetoscse ettatovi® ail Bagaks 
“Oot? enw. “o @e0ol ef fesole enem ai 


AT 


esiaU erie of tos fe : Ty: matrt ts a= 4% 


83 


damaged canals. A vivid picture of this state of affairs is fur- 
nished in an article advocating the construction of the Erie rail- 
road. It says: " It would prevent a recurrence of the state of 
things.which now exists in the city of New York. There would not 
then be, as there now are, thousands of barrels of flour and other 
kind of produce in proportion, frozen up in canal boats and in 
Sloops of the Hudson; salt would not be now selling in Albany for 
$2.50 per bushel and pork at $2.00 per hundred for want of salt to 
save it, whilst pork is worth from $5.00 to $7.00 in this city. 
Coal would not then sell here for $15.00 or $16.00 per ton; nor 
oak wood at $9.00, and hickory at $13.00 per cord, as has been the 
case for two or three weeks past, if railroads were in general use, 
but all kinds of business would move on regularly and be more 
equally divided through out the year. Produce could come to market 
as well in January as in July; and the farmer would not be obliged, 
in order to get his crop to market in the fall, to neglect pre- 
paring for the Eee rst 

Another important reason, undoubtedly, why the 
waterway could not successfully compete with the railway was that 
there had been almost no improvement in river or canal boats or 
terminal facilities for a long period of time; while at the same 
time, the railroad had made a progress in the physical factors, 
the improvements of rolling stock and the increase of the power of 


locomotives. These things led to the belief that it could move 


2, Ringwalt, Development of Transportation System in the United 
States, p.106. 


'é 


; evesa efits to envigie Bist & 


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Soy 10) bosheurt tem 00,S0ote sven i 
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freight in large quantities over long distances at the rate of 1.5 
cent per ton per mile. Moreover, the railroad runs through certain 
territory where it has scores of stations supplying it with traffic 
and many of them are so situated that they control freight that 
can find notother outlet. The steamship line that serves one port 
or two, as many of them do, must find its freight there or nowhere, 
and in the port where competition is free, the freight may go to 
any rival. 

No one will deny that transportation by rail is 
faster and better than by water. The freight car can move into a 
shipper's warehouse to get goods as well as on the road's main 
line. All goods shipped by water, on the other hand, must in some 
way be hauled to and from the water's dide and be transferred to 
and from the boat. Texefane: to compete successfully with rail- 
ways, boats must make rates to shippers not only as low as, but 
lower than those of railways. 

The water carries freight more cheaply, but under 
normal conditions, the railways deliver it more quickly. Shipping 
is confined to routes where water runs or is made to run, but the 
railway climbs hills, skirts mountains, tunnel ridges, and goes 
everywhere. 

The last, but not the least reason why the water 
carriers of the United States cannot successfully compete with 
rail carriers is the comparative inefficiency and inconvenience of 


the service rendered by the boats. The railways not infrequently 


have soliciting staffs engaged in beating the country adjacent to 


their lines for traffic. Most of the large systems have traffic 


¢ 


oid JcuLet® 6é) Bae seu 0b 4 


a Vedat 


af ate ntesolT rent svt venorizos ods 
Jor eyevlley ett. aveod ents ge. 
YivAUeS ot AAlsaod nt Segegae ® 
rhew= eved anédeve eats eds to Neath ' 


“Jith snol tevo nelivil Jmayp 
eotilen edd ,tevoetoi: elie 
wiiyiowwe enolisce Yo segtoos eat thw 
fouimes Yorld tadd bedaudtales ets a 
ya aay ; 
oat of il qidegudéede caf _ y 


st! sett at Batdidéqnon 4 

' 
isvaitoqenet’ Jug Lint Lee dma” 
ine tralott eT wedam ut : 
so ao flew ex aboos ton 09 
1 tenvo edt ge \ysedawr vd heqatie 6 
e! bae ebté o'xoedew end nor? ta 08 
ae ® eteqnoo vt ervotetent te 
tino gon exoqgide Of secet ain FT 
aewilen 16 i 
erom siogtext eelTiss tater ont | 
iup oto ¢L tevilteh éyawiles oat 
£ a0 erin as aen w1eny . 


ve 
itt lenas? ,eotadnwok odstte Daeg 


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85 


representatives in all large cities. If a shipper has a consign- 
ment of freight to send he can always find a solicitor of the road 
over which he wishes to route it. When he delivers his goods to 
the railway, it issues to him a merchantable and bankable bill of 
lading which protects him against loss of, and damage to, his goods 
But if a shipper wishes to make a shipment by an independent line 
on the Great Lakes, he has first to hunt up a captain who may or 
who may not have two or three beats available. On delivering his 
goods he gets a receipt which affords him little or no protection 
against loss or damage. Conditions such as these have put water- 
ways at still greater disadvantage in comneting with the railways. 
Competing with some of the American railways 
are some of the most flourishing lines of water traffic known, but 
does any one recall a case where the railway has been injured by 
it? Take the New York Central and connecting lines to Chicago, fo 
example. It has vigorous water competition all the way, and it 
has had to build three or four tracks to take care of its tonnage. 
The most prosperous railway lines in New England compete with Long 
Island Sound, one of the greatest inlind waterways in the United 


States. And the Atlantic coastlines compete with the Atlantic 


5 
ocean. Mr. James J. Hill once saia:"No vessel of one thousand 


tons burden can compete with a box car." This statement, as it 


now proves, is true. 


3. Quick, A., American Inland Waterways, p. 63 


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(C) The Waterway a regulator of railway rates 

The competition of the American railways with othe 
routes brought out most emphatically the necessity for low charges 
From their very beginning, railways have been compelled to compete 
withwater routes in order to secure a larger traffic. Railways 
between cities that were connected by water were obliged to reduce 
their charge between subpoints to a level that could attract at 
least a portion of the traffic to the rails. Therefore, the water 
way is a good freight rate regulator of railways. By this it is 
meant that it should reduce the rate of competing railways. Rail- 
way rates in all ports of the United States have been sche Ferns. 
affected by thecompetition not only of the Goastwise and Great 
Lake routes, but also the rivers and canals. For instance, along 
the Mississippi River, all the way from New Orleans to 5t. Paul, 
rates were lower than they could be if uninfluenced by the river. 
The rates between Buffalo and New York have also been considerably 
affected by competition via the Hie Canal and the Hudson River. 


Between innumerable other ports, particularly in the southeast, 


freight of railways are greatly influenced by minor streams which 
4 


parallel the railways. 
The public estimation of the value of competition 
of waterways with railroads was stated in 1867 in the report pre- 


paredby a Senate committee, of which Hon. Shelby M. Cullom was 


4. Dunn, S. O., American Transportation Question, Dp. 316 


sede. yavilex to sofeleget a yar 
ae 9 ogiw oc ‘et spolvemA ed? to aoltiteqnos emf 
: wiedo wol to". teleesoens end Ylileoivaedtaes Jeon sue 
eter oe..eques need eve eyawiter ,artnnbaed 
in .olTiend gage! 2 esos og “wehto me JO 

* ~ cotaw yd Betoenibo evew dene 
eit Level 2°68 atatogéue a 
hws. oPiertent .s iter eae OF Lett ie Re 
. fi ald? ya .ovewiles TS Tos a Lego telat ide nr 8 
| .cyowliet golseoqnes to é¢at edd sonnet ntueda 
sve setetéi Bestia’ edt ‘lo efrog ‘a a 


-Vlan00 ect? to pieowvon aoltiveqne 


— je yp 


, 908 ict ,étetteo Begs estyvle off gale 

aft .#68 « j2ei10 well mort yer ent Fie , revi 
ovis ‘edt ¥0 Linimy 2 ef Bieed feds dads aie 
109 ' ocla evad A40Y wok Sas oheriat 

f 2% . a wil eft Doe Lens? elt edd air norris a 
ut yltalvoliasq ,afioq tendo of 
\Oolmw ezesits tonlia ~ Seonerltet yftse ty ers ete 
p | : ase liane 
q io] ! teqmos to sulay saz to aol tint tee oiidug eat et 
| ” wioqget eft af Teal at petase sew ebeoriisy re t 


ca 


saw molivd ,M ydieXtB 20K dodge Yo Losttinmes o: 
nas 


*)) . af sficisaous NOL Pj (20 wert fs 


87 


chairman. The report stated that " the evidence before the com- 
mitiee accords with the experience of all nations in recognizing 
the water routes as the most efficient cheapness and regulators of 
railway charges. Their influence is not confined within the limits 
of the territory immediately accessible to water communication, but 
extends further, and controls railroad rates at such remote inter- 
lor points as have competing lines reaching means of transport by 
water. Competition between railroads sooner or later leads to com-| 
bination or consolidation, but neither can prevail to secure unrea- 
sonable rates in the face of direct competition with free natural 
or artificial water routes. The conclusion of the Committee is, 
therefore, that natural or artificial channels of communication by 
water when favorably located, adquately improved, and properly main 
tained afford the cheapest netiod of long distance transportation 
now known, and that they must continue to exercise in the future, 


as they have invariably exercised in the past, an absolutely con- 


trolling and beneficially regulating influence upon the charges 
5 


ee es SS 


made upon any and all means of transit. 


(D) Co-operation and Combination of Water and Rail Carriers 


Waterways are both competitors of and co-operators 


ee rer ee 


with the railroads. As competitors of the railroads, waterways 
7 Place a limit on the maximum charges which the rail carrier may 


impose. The most conspicuous instance of this fact is the effect 


5. Quick, A., American Inland Waterways, p.376. 


) > 


'f SUL O%exs OF esti 20" vue gene v 


ry 
ih 


as ee eS 
2h eS 


ve 


to ortebive exis J ait hedete- Mager 
itjam Ile 6 eocret ech any dile 
sa—qescs Jneloi} oe from any an) 
~* Set moo ton et pomen lige ate 
oO Leda OP oisiesepes % 
c 28 sede Deonitar efoutabe 8 
eae patifoseg nant = 
1 XO TAINO RRO EE RE asented a 
isvelg aso “enséen Cie fee 
tiw notéldeqgmos,2seani ae eoat 
? To soleelonoe ed! |, sete 
lo afennide Lefoltpivens yd 
evogquel yietaupbs \betscok “i! 


sorsteth mnel to Beodget gseq 


ig aa (teat edd R2 feaiouoxe eidat 
ogy eacpeiy! tat artinlupety yitalor 
hanes tc ctaem ite wi 
{lok bos sotet to nétdenidhed ated 
to ated tieqmoo dvod wen avenneso¥ | 
heosltwe oddeto ones Leoqmoe th a 
[21 oce G6Ldw peptady cimixen es 
(toe) ele! Lo somstent sgegotgencs | 


of the rates on the Great Lakes upon the charges of the ra@lroads 


that compete for the traffic free to move either by the lakes or 


by rail. The Erie Sanal, in the past, has placed a very definite 
6 


maximum limit upon railroad charges between the lakes and tide watal 
The constant interchange of a large volume ofc«traffic compels wate 
and rail carriers to co-operate. The cheapening in cost of trans 
protation during recent decades haslenormously increased the tonnagé 
of international commerce. The markets for even heavy commodities 
have become world wide, and the organization of trade upon the 
basis of a world market renders more and more necessary a close co 
ordination oi the service of rail and water carriers. 

therefore, there is no reason why the two systems of 
transportation should be unfriendly, and it is natural that the 
necessity of the co-ordination of both steamship and railroad lines 
should develop unity of service. The railroad line with steamship 
feeders would be benefited thereby and at the same time steamship 
lines with railroad alliances would be better served. There is 
a common want and a mutual advantage- each can help the other in 


its desired extension cf service, 


6. Johnson, E. R., Osean and Inalnd Water ¥ ati pe 155 


Same Si 


— 


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en 


PAA ye 


eis socy eetel taexd ed? ao ae 
joitle svoma of eett olTie1? ent ene 


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ssal eff qeewied eegtadc beogiias 10g eS 
to emilee optel a te ons tom ! 
tequedo eft © +2 819q0-00 ot. 
setcat ¥ ‘esomtonds ad nebgoet tusoet 2 [ 
ict avewtas edt .coTammés ett 

te ,obhe Sim 


———, 


2 


ehe1zt -% aottas tnayo easy b 
~£seeoen otom Das etom atebae yt Sesliae bine . 
»stsivrwseo astvew Sas [fst to solves one 0 

J Ynw moeeet of ef sued? 10 loTede. ” 
wien el $! Baa ,yfinelttay ed Meet ) 


¥}' 


¥ olf Beotllat ect yeukvtes to ytinw ae 


Gidemeege odtod to doltentito<65 


ontd emcee edt ts baa weeds Deditened eae 


-Leviea teited ed fiivew teonalila baowiel 


tr 


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,oolvzes to aglanedze 


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CHAPLER VIII 


Railroad Regulation 


(A) Causes of State “egulation and Its Action 

The ideal of state regulation is to center all of 
its force in the effictency of management. it is concerned mainly 
with matters of safety and the reasonableness of rates. 

Since the state nad the right through its legisla- 
ture to charter a corporation to construct and operate a railroad 
within its border, it is natural that the state was in a position 
to exercise and control over the railroads. However, the exercise 
of such control was very slight, tor the charter failed to regulate 
traffic. ‘this failure was due to the inadequacy of the provisions 
in the charters, which had granted to the companies unlimited righ 
and privileges. nus during the period 1870-77, the abuses of dis 
criminatory rates became acute, and since the railway was assumed 


to be a public carrier, the state legisiature had therefore the 


rightlto regulate its operation and rates, irrespective of the 


charter. 
During the period from 1850 to 18/U, the chief 
interest centered in the question of building, rather than in the 


2 
question of regulating railroads. ‘the confidence of the public at 


1. Raper, C. L., Railway Tramsportation, p.247 
2. Dixon, F. H., State Railroad Control, p./ 


A 
} 
| nolJaliged Seosrilel« @ 


iolted etl Bas aslvs tue 


j ‘ 7 ete 
| ) ‘2 ‘cocvne i +i "ol aiuget efada 20 Lash? 


cs 
) yicleu boaweones 61 t4 ,eimaegation to, yonesoltie eae 


7 
ane 


= ; . ‘ » st 7 
8 OSL AOR ROT Ort Sam Ytetea 


._— 7 a ios 
nef ef ‘as Jgtt ett ban etace en? eonte 


4) 
, 3 : A evETed ns Joursanon of golvetogres & cae 
| tezva ong good, dawn. ar gs um ore 
i 20 22 ,toverot .absonrilas end seve Logdaee i 
, cegreds efg tc? ,siahle prev san fot 
io Yoeupebani add of exh aaw oils 5% : 

.coqeoo ent od detnena Seth dott a 190 

rath Io sseuwe sag ,TY-OT8t. Sotted oar Zetwih emai 3 
, hemes ew vewlley edgy ectile Bas ,etvoOe enseed 1a 
etcleieds bet ouwmfauataes eotate emf TO LTEBS 4 4 


ovis sewit ,setet fun nofteteqo pis. 69 f 


hi ) oat ,ViGl of G86! mot? Bolteq sag ware 
eis ni carte ‘teriter satlittus to aoltiserp ent mr 
otc sot to eonehbltgoo ent ,abeotlias aie 


74s, ¢ gif 
Vig: 


a 


90 


this time was based on the theory that unrestrained interrailway com 
petition would serve as a regulator of the railway business. The 
public rested upon the assumption that competition would guarantee. 
fair treatment and just prices. But the railroads, impelled by the 


desire to increase traffic, entered upon the policy of discrimination 


between persons and places; thus appeal was made from the public to 
the government for protection. 

It was at first the state government rather than the 
federal government, that undertook to deal with the question, the 
protection of the public from the arbitrary rulings of the railroad 
corporations. The policy of the railroad regulation in this country| 
was the policy of control through commissions. There are two kinds | 
of commissions: the one of which has been called the weak commission} 
the other, the strong commission. ‘the Massachusetts commission ser- 
ves as a type of the former; the Illinois, of the latter. The chief] — 
difference between these is that a commission of the Massachusetts 
type, establisned in 1869, sometimes called an “advisory commission" 
confines its activity to supervision, either of construction or of | 
Pr is asic It possesses only the power of investigation of rates 
and of recommendation of changes. Such a commission relies mainly 
upon public opinion for the enforcement of its decisions. In the cage 
of Massachusetts, the commission enjoyed the confidence of the publig, 


and was very successful in regulating the railways. Several commis- 


3. Johnson, E.R., Principles of Railroad Transportation, p.468. 
4, Ripley, W.Z., Railroad Rates and Regulation, p.628. 
%. Johnson, E.R., rrinciples of Railroad Transportation, p.473. 


(oe 


r ecistteo'tnw tend qroed? edd ao! beoad 


Lect ,seEoil ia ess di » 260 4a seu, 


<= > 3 es eo ——— 


ewlilet endif bo rolaelones & 86 evtes BB 


> ii | & Si tinlere Tare mol Tomvass: eit 


— = , 
fs 


o¢ sald douse Docomrtine apm 6, 

mis ebam naw Lovage en af = 

oes oh Pe see 

Rod i 

221 JOSOTIS¥OR oats eat faakt vy aac’ 
up ong cttw [ees et: oo hny Sade: en 
Alloy ered tech oni noOnl otidu . 


mot¢galumes Bhaowites edd to parse 


ate rit snobes ivmos iqvomy Ic 22 


= 


; , . 
Oi:2as neoWw wed doldw Pe one 


eiteand doseaae Git of esinmes 


. ' 
efliel eft To. , ws teebi rs ee iret ote 9 
’ a. 


ott Yo moleeiugos 2 aids ad event” a¢ 
vrcelvha" na bellas cast panibe (Rae? gs 
JUI7scoo to tetitio \seleivaaie 62 i y 4 
ivneval to seweq ede ving Geenektoq yet 
lsetumoo s dow ,eagmedé: Tp 

eb aff Ic treme totes sshih £08 nbisd 
Af 


Ure ey 
web tres ag bsyolae note 5 lagoe ost 


you lten st Satta tiges ah tee 


\ 
¢t 
v 
(folie! iegaces PaO. f ar hits S 
is 
Oe eee eee _ = x 
we) » 


Sions of this type were established in other states, such as New 
York, Connecticut and yermont, though none of these had any au™~ 
thority over Pat leant | 

A commission of the Illinois type, on the other 
hand, in addition to the general functions of an advisory commis- 
sion, is clothed with some degree of authority respecting the de- 
termination of rates. In 1871, and 1873, a law was passed empower 
ing the commission to prescribe " a reasonable maximum rate of 
charges for the transportation of passengers and freight." It had 
the power to compel the railway companies to obey the commission's 
decisions or to force them to obey the laws regulating railway 
ee ee 

Other states in the West and South passed laws 
similar to the Illinois statutes just described, In 1874 Iowa 
and Wisconsin passed maximum rate laws. The same year, Minnesota 


established a commission clothed with vower to prescribe rate 


schedules. In 1879 a law was passed in Georgia by which a commis 
8 x 


sion was instituted with power to fix rates. 
(B) Causes of Federal Xegulation and Its Action 

Shortly after the state began actively to regulate 
railroad charges an agitation was begun for the regulation of 


railroads by the federal government. Several of the economic 


6. Ripley, W.Z., Railroad Rates and Regulation, p. 628. 
7. Johnson, E.R.,?rinciples of Railroad transportation, p. 476. 
8, Johnson, E.R., Principles of Railroad Transportation, p. */1. 


2 ate a he 


/- rer ess? 


causes led to the Act to Regulate Commerce of 1887. Foremost 


among these was the rapid expansion of the railway net; more new 


mileage was lad down in the year of the act than in any other 
9 


similar’ period. 


Of equal significance was the development of long- 


distance traffic for the through carriage of live=stock and 


other products to the East and a corresponding movement of manu- 
10 
factured goods to the Middle West. In the expectation of 


securing this traffic, rate wars were engaged in by the big sys- 


tems, Which brought with them abusive discriminations on a@ very 


large scale. An appeal was therefore made to Congress for legis- 


lation and in response to this call, a committee was appointed to 


investigate the question " of securing cheaper transportation of 


the constantly ineresing western and southern products to the 


Atlantic seaboard." The chairman of this committee was Windom , 


of Minnesota, and the report made in 1874 maintained that the 


through rates on traffic from the Central West to the East were 


too high, and that the federal governemnt had the right to make 


reductions in them, The suggestion made by this committee was 


to secure cheap rates by means of water and rail competition. 


The committee had neglected the main voints. The chief abuse 


Was not in the size of these rates bit in their discriminations 


9, Ripley,.W.2Z.,Railroad Rates and Regulation, p. 442. 


10. Johnson, 3.4., Principles of Railroad Transportation,p.492. 


‘ene: 
_ A | o 
TL d ‘O. § 


Se ee ee 


7 
eto fore 
Ne pe et | them 


oe 


7 
AyD) aes 
. ae (8 Ly 


7 


especially in the discrimination in favor of the long distance 
competitive traffic over the non-competitive traffic. 

During the twelve years of the report of the Windom 
committee, many things happened. By 18386, according to the Cullom 
committee, " the paramount evil chargeable against the operation 
of the transportation system of the United States, as now conductef 
is unjust discrimination between persons, places, commodities, or 
particular aeeeetations of traffic." Purely economic events had 
brought about this change of opinion. The rate wars of the seven- 
ties, a revival of general prosperity in 1879, and great mechani- 
cal improvements and economies in operation, had brought about the 
desired decline of freight a= ene In a word, the public de~ 
mand for cheap transportation was now altered to a demand for ine 
abolition of unreasonable discriminations. The Cullom committee, 
consequently brought in a bill, the distinctive Say ase Which 
was provision for a permanent administrative commission and sa 
publicity of rates as a primary remedy of the evils of the time. 

An immediate cause for the demand for federal reg 
lation of the railroad business was the inefficiency of control b 
the states, for the states could not extend their control to cove 


entirely the operation and traffic of the railways. Almost as 


much as seventy per cent of all the traffic in the United States 


11, Ripley, W.Z., Railroad Rates and Regulation, pp.22 and 411. 
12. LEpid., D. 451. 


13. tbid., p. 446. 


4 ; ; ih ean 
, ’ due ’  & 
OLS MLE lias 
—— - Pe i 
raritalets 
a 
4 der ert 
Shea 
Im; 
oe . 
wo Ox Biro 
bo _? ; 


af 


94 


moves across the borders of states. In 1886 the Supreme Court, in 
the Wabash decision, limited the authority of the state strictly to 
. the intrastate traffic and excluded the movement from one state to 
another. This decision of the Supreme Court greatly timited the 
jurisdiction of each state over railway charges, and increased the 
need for congressional or imt 

The Interstate Commerce Act of 1887 applied to all 
interstate transportation by rail alone, or by rail and water and 
to %& an extent to the transportation between the United Seaees and 
foreign countries. It did not apply to intrastate traffic nor to 
interstate or foreign traffic carried entirely by water. 

Foliowing is a brief summary of the provisions of 
the Act to Regulate Pesta 

Section 1. Applies to freight and passengers by Vande 
|| or by land and water in cases of continuous or through shipment, ever 
to foreign countries. Ali charges shali be reasonable and just; and | 
every unjust and unreasonable charge is prohibited. 

Section 2. Rebates and personal discrimination of 
every sort forbidden. 

Section 3. Local discrimination forbidden; equal 


facilities for interchange of traffic with connecting lines pre- 


scribed. 


‘si Johnson, E.R., rrinciples of Railroad Transportation, p.495. 


15. Ripley, W.Z., Railroad Rates and Regulation, pp.452-53. 


murod ecexqueé ent OBBl al ,eetetvea Oo aetebicd eaae 


& 


Ls 
tc? fate ect to gitvoniue ead bedieil.aeteae 


eck 
ete eno scott saeasvea edt Bebufoxe Bas ota 


‘toll (itweiy fed. semen ede fq materi 
po 
“at bee ,eegtarty yawdies tere stand 


av Dite [ten yd.to ,ongl einem ae 
sfas® becdinU ond seonded feldasioqanends 
tT lasd eras ssdad ot ¥Loge so bibed 
.todew vt yletiics heirs otviest 
:solaivorq ent to yiamevt’ Teltd «A Saag 
oh Aaa 
oo ron 
etesniesasq fas vigies! of setiggaa.s 
waice davon? 16 syommteades. 26 seeed. ng 
12 eidanoeest od fans sence: ya” ‘ ‘ 
Setlotdoertg al omen eidance 
eniminoals latoeted ae ee fetel BY 


‘eupo ;nebbédyo? aotventnitoelD Lado 4 aere 


anitoomunoo aétw oLtYaré To en 


Section 4. Long and short haul clause: " That it 


shall be unlawful for any common carrier subject to the provisiors 
of this act,to charge or receive any greater compensation in the 


aggregate for the transportation of passengers or of like kind of 


for a shorter than for a longer distance over the same line, in tk 


property, under substantially similar circumstances and conditiong, 


direction, the shorter being included within the longer distance} 


but this shall not be construed as authorizing any common carrier 
within the term of this act’ to charge and receive as great com=- 
pensation for a shorter as for a longer distance: Provided, how- 
ever, That upon application to the Commission appointed under the 
provisions of this act, such common carrier may, in special cases 
after ee eon by the Commission, be authorized to charge 
less for longer than for shorter distances for the transportatio 
of passengers or property; and the Commission may from time to 


time prescribe the extent to which such designated common carrier 


may be relieved from the operation of this section of this act." 


Section 5. All pooling and traffic agreements 
prohibited. 

Section 6. All rates and fares to be printed and 
posted for public inspection at all stations; and filed with the 
commission at Washington. No advance in rates except after ten 
days notice. All charges,other than published, forbidden, 

Section 9. Procedure by complaint before the 
commission or federal courts. Power to compel testimony and 


production of papers . 


€ 


PCS Wie Rte A als os, 


tad resvelo ived toda bose pool .> solsoed 
fyé teitiso dommes une aot Loiwaie 
et wold aco tedtets yas ovleoet to, satado one 

ae 


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n 


<b 


netamuotls teliats Uiiatinessdua 

avo eonatall tegiol « sot oan 

edt nistiw Debufent mated 72 d10de @ 

umep Yie Ralsldodcya as hesntanoe od jon ras: 
£0%5 28. 0vieoes Bre. eg tano ot Fda eld? To ried 


ba] 


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infogqe coltpetmmod ed? ot got®edt fags am 


iL , Van, TelTTeo ogugOo- eee Om eRe 


<r 


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coqege ts edt “ot seonsialh aedsode tol mane 108 
iJ gwotl yem aofaatumodv edt bee iYtiedenq 16, " 
moo Loveagiash douse doldw of énbixe ont | 
af to gdoliees eldd to aoliacero ait wor? be 
o71ge OLtlet? hue galleog IfA .2 aotgeel 
ie 
‘iq of o¢ sotst bow setat [fA «3 dolbsoe® 
uvlw be rr bas senoltase ifg te totsoequmt ob ids 
tts sqeoxe vetan at eonevbs of ,aosantiinat 
tdx0t 6,Seselidva made’ ‘terito ,segtade rare 
edt stole? tatatqwoe yd eqBecert 48 aoliae®: - 


» feb 


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: ' a wate 1 ote mm 2 
one Yriouttaed Leqmos oF tewoT -AFt6S 
7 i hs <_ 
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U tA. , 
= a Au hl 


96 


Section 10. Penalty of $5,000 for each offence in 
violation. 

Section 11. Interstate Commerce Commission of five 
members established; by presidential appointment; terms six years. 

Section 12. Powers of commission to inquire, with 


right to obtain full information necessary to exercise of its 


authority. Power over witnesses and production of papers, to 'Sus- 


tained by United States Circuit Sourts. 

Sections 13-14. Procedure before commission by com- 
plaint. Parties competent to appear. Decisions to include finding 
of fact upon which based, for courts on appeal. 

Section 15. Duty of commission to notify carriers to 


" cease and desist " 


from violation, or to make preparation for 
injury done. 

Section 10. To enforce obedience, procedure by peti- 
tion of commission in federal courts, which may issue writs. 

Section 20. Annual detailed reports from carriers as 
to finance, operation, rates or regulations in prescribed forms as 
desired by the commission. 

Such is the substance of the statute which marks the 
real beginning of subjection of the railroads to control py the 


federal government, 


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7 “ : Parr » 
beditxoset¢ al snelteluget to estat ee . 
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oT 
CHAPTER IX 


Development of Railway Organization 


During the early period of railway enterprise, its organ- 
ization of management was very simple. H. S. Haines, in refering 
to this subject says: "There are those among us whose memory goes 
back to the patriarchal stage of management, when most corporations 
owned not more than fifty or hundred miles of track; when the 
treasurer sold the tickets at the principal passenger station on 
the road, and the freight agent at the same station was virtually 
the head of the transportation department; when no bill was paid 
except upon the order of the EO segess and periodical reports and | 
statistical statements were unknown, 

With the increase of mileage and the growth of business, 
enlarged systems of organization were necessary. in the management 
ot a first class road, two grand departments were established. One 
related to financial affairs controlled by president, secretary, 
treasurer, attorney and directors. the other was the operating 
department, attached py a commercial branch and a mechanical branch 
They were, in turn, subdivided under tne direction of general super 
intendent. The principal officers consisted in the sub-group Were, 
a superintendent of road, with road masters as his leading assis- 
tants. In the second, there was a superintendent of machinery, 
whose chief assistants were a foreman ot a blacksmith shop and 


blacksmiths, a foreman of a car shop and carpenters, a foreman of a 


paint shop and painters, engineer (not on trains) and fireman, and 


——— " sc. Sg teem 


XI AATIAHO 


roliveelneag1® tavtieh To sneadoLeved | 
‘ 
26 ugretae, Yewlierr to bolweq ¥i2as 1 
¢ ,eontah .8 all etait UieV Sew 
exoiw on proge ebegs ernta' a leas ‘: 
In = roo gaom sedy ,co@nepanam, To apara pet 
ett jtoett to eolta Sothaud mo yrth? 
radia iostesaeq Lagloninzg eng om edoione=' 


uvctlv caw goltjedsa emas ens ge gene 


a 
iid of conw ,faomstaded. gold | 
is aouoge’: Laclhoiteq Bui ald a ced bw 
Twonkay @1ow 

leu! lo atwotw edt bas egselin To eesevegs ‘ 
rest end 41 .Viteeeonen si]ew notdaniaagne a 
bess tidssee entew esnomepegesy Dew ond hadi 
\Tistedeee ,inebleetce vd bo lfowsnes etleare is 
nijorsqo ent aw sedto eet .ageraeuwts bine 
{nedoes & Boe donat ielovemmos & ve. 

we Casemes £6 vel oot ts orit. tebris behivitdua . 
sw Juoty-Cue ent mt Devetenoo eysettto contons 
-elsoe anibeel eld 6e anesean Seo gale bro Yo) 
ties: sm to Jrobnevatteqss 8 aew si]8ny 4 
bos gode séimetoald a Te neme10t # e798 @. 

lo cemei6i < ,siedmeques Bae qode “a0 m/e soe} 


§ Sak .camextt bor (ented ae om) vesntaieg 


Se eee 


98 


car masters who directed operations of oil men and cleaners; a 
general passenger agent whose chief assistants were conductors and 
mail agents who directed the laborers of brakemen and ticket agents 
station agents, express agents, and police, a general freight agent 
whose principal assistants were conductors who directed laborers of 
brakemen and engineers on freight trains, freight station agents, 
weigher, gaugers and yard masters; a supply agent and a fuel agent, 
each of wnom had appropriate niagdatetanta. 

In the period of 1890, a highly specialized organization 
was elaborated. The railroad company, like other common corpora- 
tions, has in its organization departments and officials for the 
management of its financial and legal ar Pairs: The stockholders, 
who are the owners of the company, choose directors serving as a 
govering Baca and the directors, in turn, select a president, 
secretary, comptroller, treasurer and a legal counselor. Within 
this corporate orgainzation, a specialized organization to perform 
the function of transportation service is formed, 

The president of a railroad has general supervision and 
direction of all departments. Under his immediate control are the 
secretary's office and the legal department. The function of the 
secretary is to give notice of all meetings of the board of direc- 
tors and to keep a record of its proceedings. He signs all stock 


certificates and has custody of all leases and contracts made by 


3 
the board, 


2. Ringwalt, J. L., Development of Transportation System in the 
United States, p.362. 


3. Peabody, James, Railway Organization and Management, p.15. 


i. 


to i 
vbowe mea a 


Nos TBS bess 


mah) 


At the head of the legal department is the general conn- 
sel, who with the solicitors under his direction looks after the 
legal business and the general charge of all its eaueeae 

The financial department is concerned with the financial 
affairs of the company and is the custodian of all the company's 
funds and its pay-master for all devartments. It is responsible 
for all securities and for tne proper form of all stocks, bonds, 
and notes, The principal officer in tnis devartment is the trea- 
surer who Keeps a set of books showing the receipt and disbursement 
of all funds he handles. His books are audited monthly by the 
comptroller, who, at the end of each fiscal period reports to the 
board of directors, 

The part of the railroad organization most directly 
concerned with transportation is the operating department. This 
department performs three general duties: it provides and maintains 
the roadway; it supplies and maintains the locomotives and cars; 
it runs the trains and conducts the service at passenger and 
freight stations. Each of these three duties is constituted as a 
distinct part of the service. 

The principal official of the operating department is 
the general manager, who is the most responsible and usually the 
hardest subordinate officer in the organization. His duty is 
different in scope on different roads. On all roads he is in 


direct charge of operation and receives reports from the general 


4. Morris, R., Railroad Administration, p.30. 


5. Byer, M. L., Economics of Railway Operation, pp.23-28. 


€ , 
‘ 7 _ 


sty! on I" ce ost 


100 


superintendents, who, in turn, act through the division superin- 
tendents. Thus he controls all train movements, and is the res- 
ponsible authority in cases of delays, or of wrecks, or of special 
demands on the company's aa 

The first of the three divisions of the operating depart- 
ment is the construction department, the head of which is the chief 
engineer, who is responsible for construction on the railroad, such 
as roadbed, track, bridges, culverts, buildings and numerous other 
structures. Subordinate to the chief engineer are engineers in 


charge of maintenance: of way, and maintenance of bridges and 


i 
buildings. 


The next division of the operating department is the 
mechanical department, which is charged with the design, operation, 
and maintenance of all the equipment--locomotives, cars, wrecking 
tools etc. Its work is broadly divided into a motive power depart- 
ment, in charge of locomotives, and a car department, in charge of 
cars. The whole department is under the charge of a general super- 
intendent or chief engineer of motive power, with a master machinis 
and a master car builder as his assistants. 

The last division of the operating department is the trang 
portation department, which performs the actual work of moving per- 
sons and freight. The head of this department is the general super 


intendent of transportation, who, under the direction of the Genera 


6. Dewsnup, E. R., Railway Organization and Operation, p.141. 
7. Johnson, B. R., Principles of Railroad Transportation, p.244, 


i 


i 


S,.OnF i 
j 


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» Yoenthae Teles 


— 


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ty 
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2s 


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o 


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1Of 3 Are aaa 


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ae oo 


Manager, has general supervision of all station, train and yard 


service and of the distribution and use of locomotives and cars. It 
is his duty to enforce proper rules to secure as prompt, safe and 
economical service practicable. Under his immediate direction are 

a superintendent of transportation, and the superintendent of tele- 
graph. The principal duty of the superintendent of transportation 
is to aid the general superintendent of transportation in all matters 


relating to the prompt movement of the equipment, and the prompt 


movement of live-stock and other matters connected with train servicg, 
The superintendent of telegraph is to supervise and control the 
management of the railroad telegraph and telephone lines and the 
construction and repair of all lines of telegraph and one whe 
The most important department in the organization of a 
railway corporation is the traffic department, for it is the medium 
through which the relations of the carrier and its patrons are ad- 
justed. It solicits business; classifies the traffic, determines 
charges and settles the claims of passengers and shippers for lost 
baggage and bre eee This department, as was the case in the 
operating department, is devided into two main branches. These two 
branches are the passenger traffic and freight traffic, both of 


which are under the direction of one of the vice presidents of the 


company. Let us discuss each separately. 


The most important duty of the freight traffic department 


8. Byers, M. L., Economics of Railway Operation, pp.37-39. 
9. Morris, R., Railroad Administration, p.33. 


a a a 


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tv teas ctiw Befoenmoo sxatian verlée Ade Meese 


gauihem ert t 1o% ,dstmdcaqeh sftiew CaF ae 


_ | Sd i, ee es es ec ne v 
a Te a ain fe 
+ bee ‘. 


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./qmoug Ss etosa of BeluE Seqord soToTae” 


rooith egetboamt eld seaU  ,eldecljonag a 


2. 


AeA me 


fotse2 iett Yo saebr vote cedtime ete to yee Bat 


dquosq ecd Bua ,incsigtups e277 tieseven 


etd ~<2r206 baa pelv secie 02 of scene let to oi 
ens Dne sent ofaelet bre doetpeled? BRoni Ia eit 
»snodqeleod Bune daarpele? to seii Ifa te beget r 

S&S to nolfasigauro on! al taemmaeded aretioqme fa 


-bo o% (att Sate aeltiao eff To eroidalet Ob 
sect Lot » ,olttaug ent aeltteselo ,apentaud ; 
axogeine DOs ateaneuceg to entats odd 3 

easid al eseso sd ew Be , emFraqed etal ‘st 

vi geet? .sedonent ateam owed odult BSebiveb iv, 
16 Adod ,oltiadw distort bite olrtext ‘osnsesitd ol 
eas to edoeh fseng eofy exit to emo to molyaentb ¢ 


Viereteqea done aeue 


lneninseb oLtters Fdsilegt ous yo Ysud J snatch 


102 


is the sale of transportation and the procuring of revenue-pro- 
ducing business. It is this department which has the closest 
relationship with the shipping public, as its entire intercourse 
is with the shippers and receivers of the freight. Although the 
vice president has general supervision over all traffic matters, 
both passenger and freight, the actual charge of all freight 
matters is under the immediate direction of a freight traffic 
manager. He assigns duties to his various assistants as to the 
general freight agent, the division freight agents and the mana= 
gers of the fast freight lines. Their duties, assigned by the 
freight traffic manager, are incicated by their titles. 

The passenger traffic department has charge of all 
matters relating to passengers, including baggage, mail, and exe 
press. The duty of the passenger traffic manager is to hold him- 
self responsible for passenger train service and for all traffic 
that is handled by it. Under the passenger traffic manager are 
the general passenger agent, and the division passenger ticket 
agents. The general passenger agent is the representative of tle 
passenger traffic manager in certain designated territory. He 
has charge of the employees and work of the passenger denvartment. 
The baggage agents are to make rules for handling baggage, col- 
lecting for excess baggage, and adjusting claims for loss or 
damage to it. 

The railroads are very large owners of real estate, the 
purchases and transfers of which are in charge of a real estate 


agent, who is the custodian of all original copies of deeds, 


‘ - : ios .. a — 
tae ge tigte r 


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ee = he 
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é aA) ees = Io 
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od 
i : a 
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tA BDAOTLI LL 
. aay ‘se 


exp lens: 


10 
releases, leases, maps and records of real estate. 


There is another department in the railway organization 
Which is called the purchasing departinent. The work performed by 
this department is to supply material required by various depart- 
ments. The purchasing agent is at the head of the department, and 
subordinate to him are the store keepers, wno distribute the suppli- 
es upon the presentation of properly authorized requisitions. 


However, the organization of a railroad company up to the 


period of 1890 seems very much complicated. It would be better to 


illustrate them by means of a diagram showing the main departments 
and the principal sub-divisions in the organization of all large 


railroad companies, 


10. Peabody, J., Railway Organization and Management, p.222. 


ie hd 
} 


9 ovas Laer lo eihroces Bra aqeaa |, 
noltesiqass® yewller end at tasmyeqeb tertons ai 
uf bearsetied wrow ed? .,J3aem Seared aniesdo wg oto 
-Inayeh avoltey Yd betlypes Lalrtetan yiqgie , 

tan .3 re: edt to Daed- ede ta et 


flaque ofa edudinialbh on .creqeent edie © 
-6neltietupet bes broths eee gor uae 

eds of qu yoaquoc beosllet am ‘oinitbecasenalll 
of totted of bivow 41  ,Sedank Sqmoo someenee 
edwemdteqeh atan esd gautwodes arigelh » to aaeen bys 
antel [La to moidne ingyen eng ot onote Ly Abadi 


i 


petted ae 


CHAPTER X 


Conclusion 


In 1790, the population of the United States was not 


more than four million while in 1890, it was estimated at sixty- 


five million. Enormous as was this increase in the population of 


the country within the short period ot a hundred years, the in- 


crease of material prosperity resulting from the rapid development 


of the wonderful resources of the country were in even greater 


ratio; it had, in fact, no parallel in the history of the world. 


These wonderful results, as we know, were due chiefly to the rapid 


expansion ot the railroad system of the United States. What con- 


Gitions would be without railroads it is impossible to say, what 


they have become, having them, ia a permanent tribute to tneir 


value. 


Of the total railroad mileage of the world, the United 


At the close of 1890, the 


States in 1890, had nearly one-half. 


aggregate length of the lines in the country was 163,597 miles, all 


built in sixty years. The average mileage constructed per year Was 


nearly 2,730 miles. But this record of sixty years. wonderful as 


it was, faded into insignificance wnen compared with the achieve- 


ment of the twenty-five years since the close of the Civil War. 


The total length of the railroads at the end of 1865 was 


35,085 miles. In the twenty-five years since there they had been 


constructed 131,000 miles of new road, an average of 5,260 miles 


105 


per annum, twice the annual average of the wnole period of sixty 
years, and 5.3 times the annual average of the first period of 
thirty-five years. During these twenty-tive years the country 
encountered tnree great waves of railroad construction which were 
checked only by extraordinary financial revulsions. 

The first of these great construction waves occured 
Within the eight years intervening between the clese of the Civil 
War and the panic of 1873. In that time the length of lines con- 
structed increased 35,085 miles in 1865 to /0,268 in 1373. the 
first transcontinental line, the Union Pacific, was completed in 
this period. the cash cost of the 55,000 miles of road constructed 
in these eignt years was to excel $1,400,000,000, and the panic, 
Which began in the fall. of 18735, was probably due to tne transfor- 
mation or this vast sum from floating into fixed capital. 

The depression extended through the period from 1873 
to 1878. During 1879 matters began to improve throughout the coun- 
try and the activity of railroad construction was again vigorously 
advanced. 


During the tollowing seventeen years there were con- 


structed 95,005 miles of railroad, an increase of 26,066 miles of 


railroad beyond the road constructed in the preceding forty-five 
years. ‘the first five of these seventeen years comprised a period 
of depression; tne next four years were years of unexampled acti- 
vity, although the three years of 1883, 1884 and 1885 were years 


of hesitancy, in which no new railway enterprise of great magnitude 


txen oad oa 


iv 99 ie isley 


e ei - 
OF sO 4, iw 


106 


was begun, as was natural, after the completion in a single year 
(1882) of 11,610 miles of road. In 1886 there were constructed 8, 
128 miles; in 1887, 12,984 miles; in 1880, 7,023 miles; in 1889, 
7,170 miles and in 1890, 9,725 miles. 


Since the revival of railroad construction in 1879 


there had been completed three additional through transcontinental 


lines, the Northern Pacific, the Atlantic and Pacific, and the 
Southern Pacific; while the Union Pacific by the construction of 

its Oregon Short Line northwest to a connection with a branch of the 
Oregon Railway and Navigation Company's system, the Atchison by the 
construction of its line to a connection with the Southern Pacific, 
and the Chicago, Burlington and Quincy, by the construction of its 


Denver extension had added three other important routes to the we 


Pacific. 
This period was not only remarkable for the constructio 
of new lines but also for a development of the larger transportatio 


units. Up to 1870, 100 miles in length constituted the maximum for 


efficient operation. The Illinois Central, with 700 miles of length), 
was considered one of the longest railroads in the eee From 1870 
to 1890, the maximum length of a single railroad was about 5,000 
miles. The Pennsylvania first reached the length of about 4,000 
miles in 1880. Two years later the Lake Shore and Michigan South- 
ern absorbed its parallel line, the "Nickel Plate" road, In 1885 


the New York Central, by consolidation the West Shore and the Van- 


1. Ripley, W. Z., Railroad Finance and Organization, pp.456-57. 


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ljnocestet? davorit Leno 14ihbs opus 26. ea 

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107 


derbilt System under common control first attained sizable pro- 
portions. Even west of Chicago, the Vanderbilt interest was 
already strong in the Chicago and Northwestern which by 1886 had 
about 3,500 miles of line. By 1889 the Union Pacific, besides 

2,000 miles of line it owned, controlled nearly 4,000 more. There 
fore, the process of consolidation has given each of the several 
companies the ownershiv of more than 5,000 miles of road. Collis 

P, Huntington held advanced ideas upon the subject of consolidation. 
In 1887, before the railway commission, he said: "It has been my 


view for a good many years that there ought not to be more than 


three or four transportation companies in the United States.... 


In fact, it would be better, I think, if there was but one.... 
It would serve the people a great deal better, and do business 
ee 

The total mileage of the railroads in the United States, 
in 1890, was reported as 163,420; the cost of the railroads of 
the country would average $61,942.45 to the mile, the total for 
the 163,420 miles, being in round numbers, °10,122,639,500, It 
would at this time be interesting to inquire into the effect of 
so great a withdrawal of the active wealth of the country from 
immediate circulation, and its permanent investment in a form 
both unprofitable and inaccessible. But, on the other hand, the 
importance of railway construction cannot be stated with absolute 
accuracy, inasmuch as it touches such factors as the increase of 


population at given points, advances in the prices of property 


2. Cleveland and Powell, Railroad Finance, p.283. 


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108 


belonging to private owners, and development of new enterprises. 
The economic prosperity of this country was undoubtedly due to the 
expansion of the railway system, 

From 1870-1890 was a period of pooling activity among 
the railway companies. The object of this activity was merely to 
pool competitive business, but, during the time, a strong public 
sentiment arose against pooling. It was believed that pools kept 
up rates and, in avoiding competition, injuriously affected the 
public. Laws were enacted in several states prohibiting pooling 
and finally in 1887 Congress, after much posta oon: inserted an 
anti-pooling clause in the Act to Regulate Commerce. As we know, 
the prohibition of pooling by the Interstate Commerce Act was a 
failure. The railways were driven to other means to avoid the 
effects of competition, if any could be found. After 1887, the 
traffic associations, with the pooling arrangements eliminated, 
continued in existence. | 


For the protection of commercial and industrial inter-| 


ests, government regulation of transportation rates is necessary. 


The exercise of power over transportation companies is shared by 
the state and the nation. The states have power over intrastate 
transportation, and the federal government has power over inter- 
state traffic and rates. The states exercise their constitutional 
powers of control over railroads and railroad rates through com- 
missions. The Interstate Commerce Commission is the correspond- 
ing agent of the federal government. This commission has authorit 


over all important interstate carriers except those operating 


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i. 


109 


solely by water. Its authority extends to their rates, classifi- 
cations, regulations, and practices. The federal law, when it 
was passed, was very successfully interpreted by the railway 


companies. They sought to obey its mandates both in letter and 


spirit. The commission reported in 1888 that the railroads “con- 


formed promptly" to their orders; although in the south and west 


they were"moving more slowly. 


3. Ripley, W. Z., Railroad Rates and Regulation, p.456. 


> eg ae 


BIBLIOGRAPHY - 


American Railroad Journal, 1865-1886. 
Byer, M. L., Economics of Railway Operation, New York, 1908. 
Cleveland and Powell, Railroad Finance, New York, 1909. 
Dewsnup, E. Rk., Freight Classification, Chicago, 1913. 

_ Dewsnup, E. &., Railway Organization and Working, Chicago, 1906. 
Dixon, F. H., State Railroad Control, New York, 1896. | 
Dunn, S. 0., American Transportation Question, New York, 1912, 


Interstate Commerce Commission, Report, 1890, 1902. 


Johnson and Van Metre, Principles of Railroad Transportation, 
New York, 1916. 


Johnson, E. R., Ocean and Inland Water Transportation, 
New York, 1906. 


Mcpherson, L. G., Railroad Freight Rates in Relation to the 


Industry and Commerce of the United States, 
New York, 1909. 


Morris, R., Railroad Administration, New York, 1919. 

Noyes, W. C., American Railroad Rates, Boston, 1905. 

Peabody, J., Railway Organization and Management, Chicago, 1919 
Poor's Manual of Railroads of the United States. ‘ 
Quick, H., American Inland Waterway, New York, 1909. 


Railway Age, 1880. 
Raper, C. L., Railway Transportation, New York, 1912, 


Railroad Age Gazette, 1833, New York. 


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Railroad Gazette, Chicago, 1870-1908. 


Ringwalt, J. L., Development of Transportation System in the 
United States, Philadelphia, 1888. 


Ripley, W. Z., Railroad Finance and Organization, New York, 1915.} 
Ripley, W. Z., Railroad Rates and Regulation, New York, 1912, 
Robinson, M, H., The Holding Corporation, New Haven, 1910, 
Sakolski, A. M., American Railroad Economics, New York, 1913. 
Statutes at Large, XIV,. | 


Van Oss, American Railroads as Investment, London, 1891, 


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